The lnstitute of Chartered Accountants of Bangladesh

Corporate Laws and Practices

STUDY MANUAL
(covERlNG FTNANCE ACT. 20 r8)

CA Professional Level

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Corporate Laws and Practices
Study Manual
CA Professional Level

The lnstitute of Chartered Accountants of Bangladesh

The learning materials have been prepared by the lnstitute of Chartered Accountants of Bangladesh

First edition: October 20 l8

All rights ."r"rr"d.'No part of this publication may be reproduced in any form or by any means or stored in any
retrieval system, or transmitted in, any form or by any means, electronic, mechanical, photocopying, recording or
otherwise without prior permission of the publisher.
 Corporate Laws and Practices

Contents
Page No.

tv

7 The Companies Act 1994 and secretarial practices 01

2 Laws relati4g to The Securities and Exchange Commission 133

3. The Bank Companies Act, 1991(Amended up to 201g) 761

4. The Financial lnstitutions Act, 1993

238

5. Foreign Exchange Regulations, 7947

26t
6. The lnsurance Act, 2010
483

7. Financial Reporting Act, 2015

518

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 Corporate Luws und Practices

1. lntroduction

What is Corporate Law and how does it fit within the Professional Stage?

Structure

The syllabus has been designed to develop core technical, commercial and ethical skills and knowledge
in a structured and rigorous manner.

The diagram below shows the twelve modules at the Professional Stage, where the focus is on the
acquisition and application of technical skills and knowledge which comprises of two technical
integration modules.

The knowledge base

The module aims to familiarize the students with different aspects and provisions of company law, other
relevant laws and rules & regulations of Bangladesh Securities and Exchange Commission which they are
likely to come across in discharging their professional responsibilities. However, for more details the
students must go through the authentic version of the relevant law.

Students will learn the principal legal considerations relating to Companies Act 1994 (including the
Secretarial practices), laws relating to Bangladesh Securities and Exchange Commission, Financial
Reporting Act 2015, The Bank Companies Act l-991, The Financial lnstitutions Act 1993, The lnsurance
Act 2010 and Foreign Exchange Regulations 1947.

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 Corporate Lsws and Practices

2. Specification grid for Corporate Laws and practices

2.L Module aim

To provide students with an in depth understanding of the principles of Corporate Law and
Practices of Bangladesh.

2.2 Specification grid

This grid shows the relative weightage of subjects within this module and should guide the relative
study time spent on each. The marks available in the assessment will equate to the weightages
below, while variations may occur in individual assessments to suitably enable rigorous questions
to be set.

Syllabus Contents Weightage (%)

1. The Companies Act 1994 and Secretarial practices
2. Laws relating to the Securities and Exchan ge Commission 60
3. Financial Reporting Act, 2015
4. The Bank Companies Act 1991 20
5. The Financial lnstitutions Act 1993
6. The lnsurance Act 2010
7, Foreign Exchange Regulations, 1947 20

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 Corporate Laws and Practices

Chapter I

The Companies Act 1994 and secretarial practices

L. About The Companies Act

The Companies Act 1994 is the law that governs incorporated domestic entities in Bangladesh. lt is the
main statute governing the creation, functioning and dissolution of companies, the relationship of
shareholders to a company, periodic disclosure and audit requirements, the functions of the Registrar of
Joint Stock Companies & Firms, the jurisdiction of the courts in relation to companies etc.

2. Company and its Characteristics

The trace of origin of the term 'company' will reveal the Latin word cum - meaning with, and pains-
meaning bread; which jointly means taking bread together, a characteristic of the early company where
business matters were used to be discussed during festive gatherings. But today 'company' is widely and
commonly used for: a) joint stock companies - designed for profit, and b) statutory companies - for
undertaking works of public utility. A company in ordinary non-technical sense however, means an
association for attaining some common objectives, which may be with or without profit.

3. Characteristics of a company

The most distinguishing characteristics of a company are

lncorporated association: A company is created when it is registered under The Companies

Act. lt comes into being from the date mentioned in the certificate of incorporation. Section
(1) of The Companies Act, 1994 states the followings:

No company, association or partnership consisting of more than ten persons shall be formed
for the purpose of carrying on business of banking unless it is registered as a company under
this Act or is formed by or under any other Act of parliament.

I!. Artificial legal person: A company is an artificial person. Negatively speaking, it is not a
natural person. lt exists in the eyes of the law and cannot act at on its own. lt has to act
through a board of directors elected by the shareholders. lt has the right to acquire and
dispose of the property, to enter into contract with third parties in its own name, and can
sue and be sued in its own name.

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il!. Separate legal entity: A company has a legal entity distinct from and independent of its
members. The creditors of the company can recover their money only from the company.
They cannot sue individual members. Similarly, the company is not in any way liable for the
individual debts of its members. The property of the company is to be used for the benefit
of the company and not for the personal benefit of the shareholders. On the same ground, a
member cannot claim any ownership rights in the assets of the company either individually
or jointly during the existence of the company or in its winding up. At the same time the
members of the company can enter into contracts with the company in the same manner as
any other individual can. The principle of separate legal entity was explained and

emphasized in the famous case of Salomon v. Salomon & Co, Ltd.

IV perpetual succession: A company has perpetual succession and is independent of its

members, its existence is not affected in any way by the death, insolvency or exit of any
shareholder. "During the war all the members of one private company, while in general
meeting, were killed by a bomb. But the company survived; not even a hydrogen bomb
could have destroyed it." Perpetual succession thus means that in spite of a change in the
membership of the company, its continuity is not affected. Since a company is created by
law, it can be wound up by resorting to the legal provisions of the Companies Act'

V Limited liability: One of the important advantages of company is that the liability of its
members is limited. ln the case of a company limited by shares, the liability of members is
limited to the extent of the nominal value of shares held by them. ln the case of a company
limited by guarantee, the liability of each member is to contribute a specified amount to the
assets of the company in the event of its winding up while s/he is a member or within one
year of his/her ceasing to be a member. ln effect, we find that a member is not directiy
liable to a company's creditors but s/he is a limited guarantor of the company's debt in both
cases. However, the Act does not prevent the companies from making the liabillty of its
members unlimited.

VI Transferable shares: ln a public company, the shares are freely transferable. The right to
transfer shares is a statutory right and it cannot be taken away by a provision in the articles.
However, the articles shall prescribe the manner in which such transfer of shares will be
made and it may contain bona fide and reasonable restrictions on the rights of members to
transfer their shares. But absolute restrictions on the rights of members to transfer their
shares shall be ultra vires. However, in case of a private company, the articles shall restrict
the rights of members to transfer their shares in compliance with its statutory definition.

vil Common seal: A company is an artificial person. lt cannot act on its own. lt acts through
natural persons who are known as directors. All contracts entered into by the directors must
be under the common seal of the company. The common seal, with the name of the
company engraved on it, is used as a substitute for its signature.

vilt. Separate property: A company, being a legal person, is capable of owning, enjoying and
disposing of property in its own name. The property of the company is to be used for the
company's business and not for the personal benefit of its shareholders. A member does not

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 Corporate Laws and Practices

have insurable interest in the propertyof the company. Members have no direct proprietary
rights to the company's property, merely due to their shares. lt is also important to note
that the claim of the company's creditors will merely be against the company's property and
not that of shareholders.

lX. Capacity to sue and being sued: The company is a legal person and it can enforce its legal
rights. Similarly, it can be sued for breach of its Iegal duties.

Lifting the corporate veil

The principle of separate legal entity was established in the famous case of Salomon v. Salomon & Co.
Limited. This precedent has been followed in a number of cases and it has come to be regarded as a
fundamental principle of company law. When a company has been formed and registered under the Act,
all dealings with the companywill be in the name of the company, and the persons behind the company
will be disregarded however important they may be. This shows that once a company is registered
under the Act, there is a veil drawn between the company and its members. Following this principle, the
courts in most cases have refused to go behind the curtain and see who are the real persons composing
the company.

But sometimes the necessity of the situation may compel the authorities to disregard the corporate
legal entity and look to individual members who are in fact the real beneficial owners of all corporate
property, and this in fact is what is known as, "Lifting or piercing the corporate veil." Thus, the
doctrine
of lifting the corporate veil may be understood as the identification of a company with its members and
when the corporate veil is lifted, the individual members may be held liable for its acts or entitled to its
property.

The court will lift the corporate veil where it is essential to secure justice and/or where it is in the public
interest to do so. But it must be kept in mind that a separate legal entity is still the general rule. The
corporate entity will be disregarded only in exceptional cases. These cases may be divided in two:

(1) Under express statutory provisions.

(2) Underjudicial interpretation.

4, Corporation
Such a company when incorporated according to the law and is clothed to meet legalities, it becomes a
corporation with legal and distinct entity. A corporation as such, is an artificial being, invisible, intangible
but existing only in terms of law. lt is then a corporate personality known by a name, seal, office and
acting through its human agents. However, in Bangladesh we have sector corporations, city
corporations, trading corporations and so on, which have different administrative frameworks. The
state
owned industrial units in Bangladesh function under the control and supervision of a few statutory
bodies, which are known as sector corporations created by separate acts or ordinances. They
are
autonomous since those have their own rules and regulations. The municipalities in metropolitan
city
areas are styled as city corporations. The Trading Corporation of Bangladesh is also a
different
administrative body to handle state trading activities.

5. lndustrial Undertaking
Undertaking is to take up a venture to do something, some deal or some kind of task for performance.
lndustrial undertaking refers to any establishment, organization or manufacturing unit engaged
in the

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 Corporate Laws and Practices

production or processing of any goods, or in the development and extraction of any mineral resources
or products or in providing such services as may be specified in this behalf by the government.

6. Types of companies

Primarily there are two types of companies: Public and Private

1. Private Company: According to section 2(q), "private company" means a company which by its
articles-
i. restricts the right to transfer its shares, if any;
ii. prohibits any invitation to the public to subscribe for its shares or debenture, if any;
iii. limits the number of its members to fifty not including persons who are in its
employment;
Where two or more persons hold one or more shares in a company jointly, they shall be treated as a

single member. Private companies may be limited by shares or limited by guarantee. There cannot be a

private company with unlimited liability.

ll. Public Company: Section 2(r) states that "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.

Public companies may be classified into three types: (i) companies Iimited by shares, (ii) companies
limited by guarantee, and (iii) unlimited companies.

Company Limited by Shares: ln these companies, there is a share-capital, and each share has a
fixed nominal value, which the shareholder pays at a time or by installments. The member is not
liable to pay anything more than the fixed value of the share, whatever may be the liabilities of
the company.

ii. Company Limited by Guarantee: ln these companies, each member promises to pay a fixed sum
of money in the event of liquidation of the company. This amount is called the Guarantee'
Sometimes the members are required to buy a share of a fixed value and also give a guarantee for
a further sum in the event of liquidation. There is no liability to pay anything more than the value
of the share (where there is a share) and the guarantee.

Unlimited Company: ln these companies, the liability of the shareholder is unlimited, as in

partnership firms. Past members who ceased to be members within the previous year may be
liable in respect of debts incurred before they ceased to be members. However, there is no such
liability of members until the company is wound up. An unlimited company may be with or
without a share capital. They must register their articles of association.

7. Conversion of Private Company into-public Company

A private company having at least seven members can be converted into a public company by altering
its articles in such manner that they no longer include the provisions which, under clause of sub-section
(1) of section 2 of the Companies Act, are required to be included in the articles of a company in order

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 Corporate Laws and Practices

to constitute a private company. From the date of such alteration the company ceases to be a private
company and is required within a period of thirty days after the said date file with the Registrar either a
prospectus or a statement in lieu of prospectus (Section -231).

8. Conversion of a Public Company into Private Company

According to section 232-

1. A public company, having not more than fifty members at the time of conversion, may be
converted into a private one by passing a special resolution altering its articles so as to exclude
provisions if any, in the articles of association applicable to public company and include therein
provisions applicable to a private company.
2 lf the company has secured creditors, their written consent shall have to be obtained before
passing a resolution as per provision of sub section 232(L) and the shares enlisted with the Stock
Exchange shall have to be de-listed.

Model Questions and Answers

Question Mr. X and his wife who are the only two shareholders of a private company. They
died in an accident. Does the company come into an end?
Answer: No, the company will not come into an end. A company has perpetual succession
and is independent of the life of its shareholders. lts existence is not affected in any
way by the deat h, insolvency or exit of any shareholder

Question: ln XYZ Private company Limited, it was found that there are, in fact 54 members. on
an enquiry, it was ascertained that 6 of such members are employees of the
company and they have acquired the shares while they were employees of the
company. ls it necessary to convert the com pany into a public limited company?
Answer: A private company is a company which, by its articles -
(i) restricts the right to transfer its shares, if any;
(ii) prohibits any invitation to the public to subscribe for any shares in, or debenture,
if any;
(iii) limits the number its members to fifty not including members who are in its
employment.

ln XYZ Private company Limited, six members are its employees and shall be
excluded in determining the number of members of the company which will be 48
i.e. (5a-6). Therefore, XYZ Private Company Limited has not made any default in
complying with the restriction of maximum of 50 members and it is not necessary to
convert into a public company.

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 Corporate Laws and Practices

CONSTITUTION AND INCORPORATION

1. PRE.INCORPORATIONCONTRACTS

A company cannot be bound by a contract which was made on its behalf by any person (including a
promoter) before the company itself had been formed. At the time when the contract is made, the
company is non-existent, it cannot after its formation ratify a contract to which it could not have been a
party when the contract was made [Kenner v Baxter (1866)].

ln Kenner's case, goods had been ordered for the company's business before the company was formed.
But the company is not bound by a contract merely because it later performs it, e. g. by accepting the
goods or services. The company will, of course be liable if it makes a fresh contract after the company is
formed; but there must be clear evidence that it intended to do so.

ln the circumstances, the simplest and safest course for a promoter is to bring the negotiations to the
point of agreement but to postpone any binding contract until the company is formed and can enter into
the contract for itself. However, if it is essential to some formula of assignment or notation (by which the
company is to take over the obligations as a new contract) to be made after incorporation and when it
does so, or if it does not do so within a specified time, he is then to be released.

2. THE CERTIFICATE OF INCORPORATION

The certificate issued by the registrar after a company is registered is called the Certificate of
lncorporation. Section 25 of the Act states that the Certificate of lncorporation is conclusive evidence
about the following matters:

1. All the requirements of the Act have been complied with respect of registration and matters
precedent and incident thereto.

2 The association is a company authorized to be registered and duly registered under the Act.

3 The legal existence of the company begins from the date of issue of the certificate.

Once the certificate is issued, the incorporation cannot be challenged even though there were
irregularities prior to registration.

3. MEMORANDUM OF ASSOCIATION

Section 5 of The Companies Act, l-994 states the followings:

Mode of forming incorporated company: Any seven or more persons or, where the company to be
formed will be a private company, any two or more persons associated for any lawful purpose may, by
subscribing their names to a memorandum of association and otherwise with the requirements of this
Act in respect or registration form an incorporated company, with or without limited liability, that is to
say, either:

(a) company limited by shares, that

is to say, a company having the liability of its member limited
by the memorandum to the amount, if any, unpaid on the shares respectively held by them, or

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 Corporate Laws und Practices

(b) a company limited by guarantee, that is to say, a company having the liability of its members
limited by the memorandum to such amount as the members may respectively thereby
undertake to contribute to the assets of the company on the event of its being wound up; or

(c) an unlimited company, that is to say, a company having no limit on the liability of its members.

Section 12 of The Companies Act, l-994 deals with alteration of memorandum. The relevant provisions
are as follows:

1. Subject to the provisions of this Act, a company may, by special resolution, alter the provisions
of its memorandum with respect to the objects of the company, so far as may be required to
enable it-

(a) to carry on its business more economically or more efficiently; or

(b)to attain its main purpose by new or improved means; or

(c) to enlarge or change the local area of its operations; or

(d) to carry on some business which, under the existing circumstances, may conveniently or
advantageously be combined with the business of the company; or
(e) to restrict or abandon any of the objects specified in the memorandum; or
(f) to sell or dispose of the whole or any part or the undertaking of the
company; or
(g) to amalgamate with any other company or body of persons.

2. The alteration shall not take effect until and except in so far the Court on petition confirms
it.

3. Before confirming the alteration, the court must be satisfied-

(a) that sufficient notice has been given to every holder of debentures of the company, and
to
any person or class of persons whose interest will, in the option of the Court, be affected by
the alteration; and
(b) that, with respect to every creditor who in the opinion of the Court is entitled to object, and
who signifies his objection in manner directed by the Court, either his consent to the
alteration has been obtained or his debt or claim has been discharged or has been
determined, or has been secured to the satisfaction of the court;

Provided that the Court may, in the case of any person or class, for special reasons,
dispense with the
notice required by this section.

As per section 13 of the Companies Act, 1994 the Court may make an order confirming
the alteration
either wholly or in part, and on such terms and conditions as it thinks fit, and may make such
order as to
costs as it thinks proper.

4. Change of name of a Company and its consequences

With regard to change of name of a company the following provisions of section j.1 of The
Companies Act,'1,994 are applicable:

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 Corporate Laws and Practices

Section 11(6): Any company may, by special resolution and subject to the approval of the Registrar
signified in writing, change its name.

Section 11(7):where a company changes its name, the Registrar shall enter the new name
on the
register in place of the former name, and shall issue a certificate of incorporation in its new name
to meet the circumstances of the case and on the issue of such a certificate, the change of name
shall be complete.

or
Section 11(8): The change of name shall not change any rights or obligations of the company,
render defect in any legal proceedings by or against the company; and any legal proceedings that
might have been continued or commenced against it by its former name may be continued or
commenced against it by its new name.

5. Prospectus

A prospectus is an invitation to the public to purchase shares or debenture of a company. ln other

words, a prospectus may be defined as any document that includes any notice, circular, advertisement
or other document inviting deposits from the public or inviting offers from the public for subscription or
purchase of any share in, or debentures of a body corporate. Prospectus has the following
cha racte ristics:

1. lt is a document described or issued as a prospectus.

2. lt includes any notice, circular, advertisement inviting deposits from the public.
3. lt is an invitation to the public.
4. The public is invited to subscribe the shares or debentures of a company.

8. Statement in lieu of ProsPectus:

A public company having a share capital and not issuing prospectus must at least 3 days before the first
allotment of shares or debentures, file with the Registrar for registration a statement in lieu of
prospectus. The statement must be in the form prescribed in Schedule lV of the Companies Act, 1994.

9. Registration of Prospectus
Before publication of prospectus inviting people to subscribe shares or debentures of a company, a copy
of the prospectus must be delivered to the Registrar for registration on or before the date of
publication. lt should be signed by the directors or proposed directors of the company or by their agent.
On the face of the prospectus delivered to the Registrar for registration, it should be stated that a copy
has been delivered for registration; and must contain a list of statements included in the prospectus.
The registrar shall not register a prospectus unless the prospectus contains all the elements mentioned
earlierand the prospectus is accompanied bythe consent in writingof the person if any, named therein
as the auditor, legal adviser, attorney, solicitor, banker or broker of the company or intended company,
to act in that capacity. No prospectus shall be issued more than ninety days after the date on which a
copy thereof is delivered for registration, and if a prospectus is so issued, it shall be deemed to be a
prospectus a copy of which has not been delivered under this section to the Registrar. lf a prospectus is
issued without delivering a copy thereof to the Registrar, the company and every person from those
who have knowing been a party to the issue of the prospectus shall be punishable with the fine which
may extend to five thousand taka (Section 138).

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 Corporate Laws and Practices

10. Penalty for untrue statement in Prospectus

Section 146 spells down that when a prospectus includes any untrue statement every person who
authorized the issue of the prospectus shall be punishable with imprisonment for a term which may
extend to two years, or with fine which may extend to five thousand taka or with both, unless he proves
either that the statement was immaterial or that he had reasonable ground, to believe that the
statement was true.

Lt. Documents used in incorporation of companies

The papers and documents to be submitted to the Registrar along with the Memorandum of Association
and the Articles of Association are as follows:

ln case of Private Company -

(i) Declaration of Compliance (Form 1)
(ii) Notice of situation of Registered Office (Form Vt)
(iii) Particulars of Directors, Manager and Managing Agents (Form Xll)
(iv) Consent of Directors to act (Form tX)
(v) Lists of persons consenting to be Directors (Form X)

L2. Commencement of business

A public company, having a share capital and issuing a prospectus, cannot commence business until the
Registrar issues a certificate known as the "Certificate of Commencement of Business". This certificate is
issued after the following formalities have been complied with:

i. The minimum subscription has been raised.

ii. Every director has paid the money payable on application and an allotment for the shares taken
up by him.
iii' No money is repayable for failure to obtain stock exchange recognition for the shares, where such
recognition was promised.
iv. A duly verified declaration by a director or the secretary has been filed with the Registrar that the
above requirements have been complied with.

However, a public company having share capital but not issuing a prospectus, will get the
commencement certificate if the following conditions are fulfilled:

A statement in lieu of prospectus has been filed with the Registrar.

ii. The directors have paid the money due from them on account of shares.
iii A declaration by a director or the secretary has been filed with the registrar stating that condition
(b) has been satisfied.

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 Corporate Luws and Practices

Model Questions and Answers

Question The articles of association of a company (formed to improve and encourage breeding of
poultry) contained a provision that no remuneration shall be paid to the members of the
Board of the company. But the company owing to increase in the business passed a
special resolution providing for equitable remuneration to the Board members for the
services to be rendered by them. Can this alteration of the memorandum be confirmed?
lf so, state how and by whom?

Answer: The company can make the required alteration in its articles of association on the ground
that it will enable the company to carry on its business more economically and efficiently.
The articles of association of a company can be changed by the shareholders passing
special resolution in the General Meeting called for this purpose. Once the alteration in
the articles of the company is confirmed by the Registrar of Joint Companies and Firms
(complying with all regulatory requirements) there is no restriction in paying equitable
remuneration to the members of the Board.

Question: A Company Limited intends to change its name. lt has availed two separate loans from B
Company Limited and C Company Limited. ln such situation what is the procedure to be
followed for changing the name of the company? Will the right of the lenders be anyway
affected by the change of name of their borrowing company?

Answer: As per Section 11(6) of the Companies Act, 1994 a company by passing special resolution
and subject to the approval of the Registrar in writing may change its name. Where a
company changes its name, the Registrar shall enter the new name on the register in
place of the former name and shallissue a certificate upon which the change of the name
shall be complete.

Section 11(8) of the Companies Act lays down as follows

"The chonge of name does not chonge any rights or obligotions of o compony, or render
defective ony legol proceedings by or agoinst the compony; ond legal proceedings thot
might hove been continued or commenced agoinst it by its former nome moy be continued
or commenced against it by its new nome."

ln view of the above, it is clear that the liabilities of a company do not cease upon the
change of name of the company and shall continue nevertheless. So, the right of the
lenders shall not be anyway affected by the change of name of their borrowing company.

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SHARES AND CAPITAL

1. CAPITAL

The capital of a company means the amount of money that it is authorized by its Memorandum to raise,
generally by the issue of shares. Hence, a company's capital is also called 'share capital'. Sometimes the
phrase 'debenture capital' is used to denote the amount borrowed by the company and secured by
debentures. ln company law, the word 'capital'is used to mean the following:
7. Nominal or authorized share capital: Nominal capital or authorized capital is the total face value
of the shares which the company is authorized to issue by its memorandum of association. The
totalshare capitalof the company is also called its registered capital.
2. Issued share capital: lssued capital is that part of authorized capital which is actually offered to
the public for sale.
3. Subscribed share capital: Subscribed capital is that part of the issued capital which is taken up and
accepted by the public.
4. Paid up capital: Paid up capital is the amount of money actually paid by the subscribers or
credited as so paid.
5. Reserve capital: A company by a special resolution may declare that the 'uncalled capital' of the
company shall not be capable of being called up except when the company is wound up. This
'uncalled capital' becomes the reserve capital of the company (sec. 74).

2. CLASSIFICATION OF SHARES

The share capital of a company is generally dived into the following classes of shares

1'. Preference shares: Preference shares are those shares whose holders are entitled to a fixed rate
of dividend, before any dividend is paid to the ordinary shares. Preference shares might be
cumulative or non-cumulative. ln the case of cumulative preference shares, if the profit made by a
company in a particular year is not sufficient to pay dividend at the prescribed rate, the shortage
must be made up of the profits of succeeding year. ln non-cumulative preference shares, such
shortages are not required to be made up. Dividends which are not paid, do not accumulate but
lapses.

2. Ordinary shares: Ordinary shares are those whose holders are entitled to dividend out of the net
profits of the company after the fixed dividend on preference shares has been paid up.
3. Deferred shares or Founders'shares: Deferred shares or Founder's shares are usually allotted to
the promoters in consideration of the services rendered by them; and to the underwriters in
consideration of the commission due to them. ln either case, the particulars of contact must be
filed with Registrar and the number of such shares must be stated in the prospectus or in the
statement in lieu of prospectus (Sec. 135), The deferred shareholders are usually entitled to a
certain proportion of the profits which remain after paying the dividend on the capital paid up on
all the other shares for the time being issued at a particular rate.

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4. REDEEMABLE PREFERENCE SHARES

Redeemable shares are those which are purchased back by the company subject to the conditions laid
down in the articles and in the act. Section 154 of the Act provides that a company limited by shares
may, if so authorized by the articles, issue preference shares which are, or at the option of the company
are to be liable, to be redeemed. This section specifies the following rules relating to redemption:

a. Such shares shall not be redeemed except put of profits of the company which would otherwise
be available for dividend or out of the proceeds of a fresh issue of shares made for the purposes of
the redemption.
b. Such shares shall be redeemed unless they are fully paid

c. Where any such shares are redeemed otherwise than out of the proceeds of fresh issues, they
shall be transferred to a reserve fund, to be called "the capital redemption reserve fund" a sum
equal to the amount applied in redeeming the shares.
d. Where any such shares are redeemed out of the proceeds of a fresh issue, the premium, if
payable on redemption, must be provided for out of the profits of the company before the shares
are redeemed.

Subject to the aforesaid rules, the redemption of preference shares may be effected on such terms and
in such manner as may be provided by the articles of the company. lf a company defaults in complying
with any of the provisions of this section, the company and also every officer of the company who is in
default shall be liable to a fine not exceeding two thousand Taka.

5. STOCK

When all the shares of a company have been fully paid, they may be converted into stock in a general
meeting if so authorized by the articles [sec,53 (1)]. "The use of the term stock merely denotes that the
company have recognized the fact of the complete payment of the shares, and that the time has come
when these shares may be assigned in fragments, which for obvious reasons could not be permitted
before"- Per Lord Cairns in Morris Vs. Aylmer.

Conversion into stock is made because it is a convenient method of denoting the capital of the company
and the interest if the members. lt does not affect the rights of the members in any way. When shares
are converted into stock, notice must be given to the Registrar. The register of members must thereafter
show the amount of stock held by each member instead of the amount of shares (sec. 55).

7. MINIMUMSUBSCRIPTION

Where shares are offered to the public for subscription, the prospectus must mention the minimum
amount which must be raised by the issue of shares before the company can commence business. The
minimum subscription is to be fixed by the directors or by the persons who have signed the
memorandum. Section t48(2) states that no allotment shall be made of any capital of a company
offered to the public for subscription, unless the amount stated in the prospectus as the minimum
amount is raised by the issue of these shares and at least 5% of that amount have been paid in cash to
the company. This amount is to be determined by taking into account the flowing expenses:
L. The purchase price of any necessary property.
2. The preliminary expenses, including commissions payable for the sale of shares.
3. Repayment of any money borrowed by the company for the above two purposes.
4. Working capital.

12 lllagc
 Corporate Lah,s and Practices

The amount of minimum subscription stated in the prospectus shall be reckoned exclusively of any
amount payable otherwise than in cash. All moneys received from applicants for shares shall be
deposited and kept in a scheduled bank until the certificate to commence business is obtained.

8. ALTERATION OF CAPITAL

A company can alter its share capital in a manner mentioned in its articles. However, if no such power is
provided in the article, the may alter the article by a special resolution so as to provide for such power. The
capital may be altered, so as to increase, consolidate, cancel or convert the shares (sec. 53).

1. lncrease of capital: The share capital of a company whether converted into stock or not, may be
increased in a general meeting by issuing new shares (sec. 53). Where the capital is increased
beyond the registered capital, the notice of increase, including the particulars of the classes of
shares affected, must be filled with the Registrar within 15 days of the passing of the resolution.

lncreasing share by issuing new shares: According to section 1-55, where the directors decide to
increase the subscribed capital of the company by issue of further shares within the limit of the
authorized capital, the following procedure are to followed:

(a) Such further shares shall be offered to the existing equity shareholders in prgportion as
nearly as circumstances admit.
(b) such offer shall be made by notice specifying the number of shares offered and specifying
the time limit, not being less than fifteen days from the date of the offer, within which the
offer if not accepted, will be deemed to have been declined;
(c) after the expiry of the time specified in the notice aforesaid, or on receipt of earlier
intimation from the members to whom such notice is given that he declines to accept the
shares offered, the directors may dispose of the same in such manner as they may think
most beneficial to the company.

2. Consolidation: lf the articles provide, the company may in a general meeting, consolidate and
divide all or any of its share capital into shares of a larger amount than the existing shares or
convert all or any of the paid up shares into stock and reconvert into paid up shares of any
denomination [sec.53 (1) (b) (c)]. Notice of consolidation, conversion or reconversion is to be filed
within L5 days thereof with the Registrar (Sec. 54(1)). ln default, the company and its officers are
liable to a fine extending to Tk. 200 per day (Sec. 5 (2)).

3 Subdivision: A company, if authorized by its articles, may sub-divide in general meeting the capital
into shares of a smaller amount than is specified in the memorandum. The effect of such sub-
division will be that the remaining unpaid amount on each new share shall be proportionate to
that unpaid on the shares from which the division made [(sec. 53(1Xd)]

4, Cancellation: A company may cancel any share which at the date of exercising the power in that
behalf have not been subscribed for or agreed to be subscribed for by any person, and diminish
the amount of its share capital by the amount of the shares so cancelled [(sec. 53(1)(e)].

13 lP*g*
 Corporate Laws und Pructices

Restriction on purchase by company or Ioans by Company for purchase of its own shares: -

Section 58(1) of The Companies Act, 1994: No company limited by shares shall have power to buy its own
shares or the shares of a public company of which it is a subsidiary company, unless the consequent
reduction of capital is effected and sanctioned in the manner provided by sections 59 to 70.

Section 58(2) of The Companies Act, 1994: No company limited by shares other than private company
or a subsidiary company of a public company, shall give whether directly or indirectly, and whether by
means of a loan, guarantee, the provision of security or otherwise any financial assistance for the
purpose of or in connection with a purchase made or to be made by any person of any shares in the
company:

Provided that nothing in this section shall, where the lending of money is part of the ordinary business
of a company, be taken to prohibit the lending of money by the company in the ordinary course of its
business.

Section 58(3) of The Companies Act, 1994: lf a company acts in contravention of this section, the
company, and every offer of the company who is knowingly and willfully in default shall be liable to a
fine not exceeding five thousand Taka.

Section 58(a) of The Companies Act, 1994: Nothing in this section shall affect the right of a company to
redeem any shares issued under section 154.

Reduction of share capital

Section 59(1) of The Companies Act, 1994: Subject to confirmation by the Court, a company limited by
shares, if so authorized by its articles, may by special resolution reduce its share capital in any way, and
in particular the company may, as part of this general power-

a. extinguish or reduce the liability on any of its shares in respect of share capital not paid-up;

b. either with or without extinguishing or reducing liability on any of its shares, cancel any paid-up
share capital which is lost or presented by available assets;

c. either with or without extinguishing or reducing liability on any of its shares, pay off any paid-up
share capital which is in excess of the wants of the company;

d. so far as is necessary, alter its memorandum by reducing the amount of its share capital and of
its shares accordingly.

Section 59(2) of The Companies Act, 1994: A special resolution under this section is in this Act called a

resolution or reducing share capital.

Section 50 of The Companies Act, 1994: Where a company has passed a resolution for reducing share
capital it shall apply by petition to the Court for an order confirming the reduction.

Section 60 of The Companies Act, 1994: On and from the passing by a company of a resolution for
reducing share capital, or where the reduction does not involve either the diminution of any liability in
respect of un-paid share capital or the payment to any shareholder of any paid-up share capital, then on

14 lX]*gc
 Corporate Laws and Practices

and from the making of the order by the Court confirming by the reduction the company shall add to its
name, until such date as the Court may fix, the words "and reduced" as the last words in its name and
those words shall until that date be deemed to be part of the name of the company:

Provided that where the reduction does not involve either the diminution of any liability in respect of
unpaid share capital or the payment to any shareholder of any paid-up share capital, the Court may, if it
thinks expedient dispense altogether with the addition or words "and reduced".

9. PROCEDURE FOR REDUCTION OF SHARE CAPITAL

Reduction of capital is possible only by passing a special resolution and confirmation by the court. The
court would inquire into the objections, if any, raised by the creditors. ln this respect, the court settles the
list of creditors entitled to object and issues public notices under section 62. On hearing the objections, the
court may confirm the reduction on such terms and conditions as it may dam fit (sec. 64).

10. RESERVE SHASRE CAPITAT OF LIMITED COMPANY

A limited company may by special resolution, determine that any portion of its share capital which has
not been already called up shall not be called up, except in the event and for the purposes of the
company being wound up, and thereupon that portion of its share capital shall not be capable of being
called up except in the event and for the purposes aforesaid; and such- portion shall be called reserved
share capital (section-74).

11. UNLIMITED COMPANY TO PROVIDE FOR RESERVE SHARE CAPITAL ON RE-REGISTRATION

When an unlimited company having a share capital adopts a resolution for registration as a limited
company, can increase the nominal amount of its share capital by increasing the nominal amount of
each of its shares, but subject to the condition that no part of the amount by which its capital is so
increased shall be called up except in the event of the company being wound, up. The portion of the
share capital increased shall be called the reserved share capital (section 73).

12. Transfer of shares:

As per section 30(1) of The Companies Act, 1994, the shares and other interest of any member in a
company shall be deemed to be movable property and shall be transferable in the manner
provided by the articles of the company.

As per regulation 18 of schedule I of The Companies Act, 1994, the instrument of transfer of any
share in the company shall be executed both by the transferor and transferee, and the transferor
shall be deemed to remain holder of the share until the name of the transferee is entered in the
register of members in respect thereof.

Shares in the company shall be transferred following form prescribed in regulation 19 of schedule
I of The Companies Act, 1994.
Regulation 20 of schedule I of The Companies Act, 1994 states the followings:

1. The directors may decline to register any transfer of shares, not being fully-paid shares, to a
person of whom they do not approve, and may also decline to register any transfer of
shares on which the company has lien.

15 lFag*
 Corporate Laws and Practices

2. The directors may also suspend the registration of transfers during the fourteen days
immediately preceding the ordinary general meeting in each year.

3. The directors may decline to recognize any instrument of transfer or refuse to register such
transfer, unless-
a. A fee not exceeding taka ten as may be fixed by the company is paid to the
company in respect thereof;

b. The instrument of transfer is accompanied by the certificate of the shares to

which it relates; and

c. such evidence as the directors may reasonably require to show the right of the
transferor to make the transfer.

4. lf the directors refuse to register or decline to recognize the transfer of any shares, they
shall, within two months after the date on which the transfer was lodged with the
company, send to the transferee and the transferor notice of the refusal or decline.

Regulation 21 of schedule I of The Companies Act, 1994 states the followings:

The executors or administrators of a deceased sole holder of a share shall be the only person
recognized by the company as having any title to the share. ln the case of a share registered in
the names of two or more holders, the survivors or survivor or the executors or administrators
or the deceased survivor, shall be the only person recognized by the company as having any title
to the share.

Regulation 22 of schedule I of The Companies Act, 1994 states the followings

1. Any person becoming entitled to a share in consequence of the death or insolvency of a

member shall, upon such evidence being produced as may from time to time be required by
the directors, have the right, either to be registered as a member in respect of the share or
to make such transfer of the share as the deceased or insolvent person could have made.

2. Notwithstanding the provisions of sub-regulation 1 the directors shall have the same right to
decline or recognize the transfer or to refuse or suspense the registration of the transfer as
they could have done under regulation 20, had the transfer been made by the deceased or
insolvent shareholder before his death or insolvency.

A person becoming entitled to a share by reason of the death or insolvency of the holder shall be
entitled to the same dividends and other advantages to which he would be entitled if he were the
registered holder of the share, except that he shall not, before being registered as a member in
respect of the share, be entitled in respect of it exercise any right conferred by membership in
relation to meetings of the company.

Section 38{1) of The Companies Act, 1994: An application for the registration of the transfer of shares in a
company may be made either by the transferor or the transferee, provided where such application is
made by the transferor no registration shall in case of partly paid shares be effected unless the company

16 lF*g*
 Corporate Laws and Practices

gives notice of the application to the transferee and subject to the provisions of sub-section (7)
the
company shall, unless objection is made by the transferee two weeks from the date of receipt of the
notice, enter in its register of members the name of the transferee in the same manner and subject to the
same conditions as if the application for registration was made by the transferee.

Section 38(2) of The Companies Act, 1994: For the purpose of sub-section (1), notice to the transferee
shall be deemed to have been duly given if dispatched by prepaid post to the transferee at the address
given in the instrument of transfer and shall be deemed to have been delivered in the ordinary course of
post.

Section 38(3) of The Companies Act, 1994: lt shall not be lawful for the company to register a transfer of
share in or debentures of the company unless the proper instrument of transfer duly stamped and
executed by the transferor and the transferee has been delivered to the company along with script:

Provided that, where it is proved to the satisfaction of the directors of the company that an instrument
of transfer signed by the transferor and transferee has been lost, the company may, if the directors
think fit, on an application in writing made by the transferee and bearing the stamp required by an
instrument of transferor register the transfer on such terms as to indemnity as the directors may think
f it.

Section 38(a) of The Companies Act, 1994: lf a company refuses to register the transfer of any shares
or
debentures, the company, shall, within one month from the date on which the instrument of
transfer
was lodged with the company, send to the transferee and the transferor notice of the refusal.

Section 38(5) of The Companies Act, 1994: lf default is made in complying with sub-section (4)
of this
section, the company shall be liable to a fine not exceeding one hundred taka for everyday
during which
the default continues and every director, manager secretary other officer who is knowing by a party
to
the default shall, be liable to a like penalty.

Section 38(5) of The Companies Act, 1994: Nothing in sub-section (3) shall prejudice any power
of the
company to register as shareholder or debenture holder any person to whom the right
to any shares in
or debentures of the company has been transmitted by operation of law.

Section 38(7) of The Companies Act, 1994: Nothing in this section shall prejudice any power
of the
company under its articles to refuse to register the transfer of any shares.

Certification of transfer

Section 39(1) of The Companies Act, 1994: The certification by a company of any
instrument of transfer
of shares in, or debentures of, the company, shall be taken as a representation by the
company to any
person acting on the faith of the certification that there have been produced
to the company such
documents as on the face of them show a prime facie title to the shares or debentures
in the transfer
named in the instrument of transfer, but not as a representation that transferor
has complete title to
the shares or debentures.

17 I i] a g *
 Corporate Laws and Pructices

Section 39(2) of The Companies Act, 1994: Where any person acts on the faith of an erroneous
certification made by a company negligently, the company shall be under the same liability to him as if
the certification has been made fraudulently.

section 39(3) of The companies Act, 1994: For the purposes of this section-

a. an instrument of transfer shall be deemed to be certificated if it bears the words "certificate

lodged" or words to the like effecU

b. the certification of an instrument of transfer shall be deemed to be made by a company, if-

i) the person issuing the certificated instruments is a person authorize to issue such

instruments of transfer on the company's behalf; and

ii) the certification is signed by any officer or servant of the company or any other
person authorized to certificate transfers on the company's behall or if a body
corporate has been so authorized by any officer or servant of that body corporate'

c. a certification shall be deemed to be signed by any person if it purports to be authenticated by

his signature, unless it is shown that the signature was placed there neither by himself nor by
any person authorized to use the signature for the purpose of certificating transfers on the
company's behalf.

Regulation 7 of the first schedule I of The Companies Act, 1994 states the following:

lf a share certificate is defaced, lost or destroyed it may be renewed on payment of such fees, if any, not
exceeding five Taka, and on such terms, if any, as to evidence and indemnity as the directors think fit.

Transfer of shares by legal representative

Section 40 of The Companies Act, 1994: A transfer of the share or other interest of a decease member of a
company made by his legal representative shall, although the legal representative is not himself a member,
be as valid, as if he had been a member at the time of the execution of the instrument of transfer.

Application of premiums received on issue of shares

As per section 57 of The Companies Act, 1994 application of premiums received on issues of shares will
be as follows:

1. Where a company issues shares at a premium, whether for cash or otherwise, a sum equal to
the aggregate amount or value of the premiums on those shares, shall be transferred to an
account, to be called "the share premium account" and the provisions of this Act relating to the
reduction of the share capital of a company shall, except as provided in this section, apply as if
the share premium account were paid up share capital of the company.

18ll];ig*
 Corporate Laws and Pructices

2. The share premium account may be applied by the company-

a. in paying up unissued shares of the company to be issued to member of the company as

fully paid bonus shares;

b. in writing of the preliminary expenses of the company;

c in writing off the expenses of, or the commission paid or discount allowed, on, any issue
of shares or debentures of the company; or

d in providing for the premium payable on the redemption of any redeemable preference
shares or of any debentures of the company.

3. Where a company has, before the commencement of this Act issued any shares at a premium,
this section shall apply as if the shares had been issued after the commencement of this Act:

Provided that any part of the premium which has been so applied that it does not at the
commencement of this Act form an identifiable part of the company's reserves within the meaning of
Schedule Xl shall be disregarded in determining the sum to be included in the share premium account.

Questions for discussion

Question: A shareholder of XYZ company Limited, a private limited company, has applied to the
Board of Directors of the Company for approval of transfer of 10,000 shares which are
fully paid. However, the transferee did not enclose the share certificates and transfer
instruments (Form No. 117) stating that those were lost.

a) Can the company approve the transfer without share certificates and transfer
instruments?

b) What formalities to be completed to approve the transfer as mentioned above, if

at all?

Answer: The provision of sub-section 3 of section 38 of Companies Act makes a provision about
transfer where the instrument is lost. The board may approve the transfer without
instrument on application of transferee where the transferee provides indemnity to
the satisfaction of the board but the application must bear stamp duty as required by
the instrument.

Section 38 does not deal with the contingency for loss of share certificate or allotment
letter. The board may refuge transfer where certificate is not lodged along with the
Transfer Form. Regulation 7 of schedule L empowers the board to take decision in case
certificate is lost, defaced or destroyed. Without issuing a duplicate certificate, transfer
cannot be approved by the board. Before issuing duplicate certificate, the following
formalities are usually observed:

19lFage
 Corporate Laws and Practices

a An application from the member signed in the same way as his specimen signature
provided in respect of the shares lost is to be obtained along with an affidavit.

a The Stock Exchange should be notified, if the company is a listed company

a An advertisement is to be inserted in a local newspaper having reasonably wide

circulation, at the cost of the member specifying the time within which any
objection may be sent to the company against issue of duplicate share certificate.

a An indemnity bond on requisite stamp paper is to be obtained on the expiry of the

limit of time mentioned in the advertisement.
a The matter should then be placed before the board of directors for investigation &
their satisfaction and orders.

a A duplicate share certificate may then be issued after taking necessary charges as
per provision of the articles, prominently marking on the share certificate and
counter foil that it is a duplicate certificate issued in lieu of certificate number,
replaced & an entry in the register of duplicate share certificate and also in the
original register of members have to be made.

Question 'A' purchased 3,000 nos. of shares XYZ Company Limited. Later on the certificate was
lodged to the Company for registration of transfer of 1,000 shares (out of 3,000) in the
name of 'B'. The company certified the transfer but instead of destroying the original
certificate, returned it to the transferor who borrowed money giving it as collateral. ls the
Company liable to the lender?

Answer: if he had deceived persons to accept the

The company is not liable to the lender. Even
transfer of those 1,000 shares, the company would not have been liable to the
transferee(s). The reason is that share certificate is neither a negotiable nor a warranty of
title on part of the company issuing it. lf the Company after certifying returns the
certificate to the transferor through a mistake and the transferor pledges it in fraud this
will not give the pledge a cause of action against the company.

Question: A deceitful prospectus containing an untrue statement was issued by the defendant on
behalf of ABC Company Limited. The plaintiff, Mr. X, received a copy of it but did not take
any share initially in the Company. The allotment was completed and one year afterwards
Mr. X bought 2,000 nos. of shares of ABC Company Limited from the secondary market.
The plaintiff sued the defendant for recession on the ground of untrue statement in the
prospectus. Give your opinion on the legal status of the situation.

Answer: ln the stated situation no remedy is available for Mr. X. Remedy is available only for those
who have taken shares directly from the Company. A purchaser of shares from the
secondary market buys shares on the basis of market information not on the basis of the
prospectus.

20lP*p*
 Corporate Luws and Practices

REGUTATIONS FOR MANAGEMENT OF A COMPANY LIMITED BY SHARES

ScHEDULE-t (SECT|ONS 2,17, L8,95, 367):

Preliminary

t ln these regulations, unless the context otherwise requires, (a) expressions defined in the
Companies Acl, 1994, shall have the meanings so defined; and (b) words importing the singular
shall include the plural, and vice versa; and (c) words importing the masculine gender shall include
females, and words importing persons shall include bodies corporate.

Business

2 The directors shall comply with the restrictions on the commencement of business imposed by
Section L50 of the Companies Act 1994,if, and as far as, those restrictions are binding upon the
company.

Shares

3. Subject to the provisions, if any, in that behalf of the memorandum of association of the company,
and without prejudice to any special rights previously conferred on the holders of existing shares
in the company, any share in the company may be issued with such preferred, deferred or other
special rights, or such restrictions, whether in regard dividend, voting, return of share capital, or
otherwise, as the company may from time to time by special resolution determine (and any
preference share may with the sanction of a special resolution be issued on the terms
that it is or
at the option of the company is liable to be redeemed)

a. lf at any time the share capital is divided into different classes of shares, the rights
attached to any class (unless otherwise provided by the terms of issue of the shares of
that class) may [subject to the provisions of Section 71 of the Companies Act 1994], be
varied with the consent in writing of the holders of three-fourths of the issued shares of
that class, or with the sanction of an extraordinary resolution passed at a separate
general meeting of the holders of the shares of the class.
b. To every such separate general meeting the provisions of these regulations relating to
general meetings shall mutatis mutandis apply, but so that the necessary quorum shall
be two persons at least holding or representing by proxy one-third of the issued shares
of the class.

4. No share shall be offered to the public for subscription except upon the terms that the amount
payable on application shall be at least five per cent of the nominal amount
of the share; and the
directors shall, as regards and allotment of shares, duly comply with such of the provisions of
Sections 148 and 151 of the companies Act, 1994, as may be applicable thereto.

5. Every person whose name is entered as a member in the register of members shall, without
payment, be entitle to a certificate under the common seal of the company
specifying the share or
shares held by him and the amount paid up thereon:

21 lPag*
 Corporate Laws and Practices

Provided that, in respect of a share or shares held jointly be several persons, the company shall
not be bound to issue more than one certificate, and delivery of a certificate for a share to one of
severaljoint-holders shall be sufficient delivery to all.

6 lf a share certificate is defaced, lost or destroyed, it may be renewed on payment of such fee, if
any, not exceeding five taka, and on such terms, if any as to evidence and indemnity as the
directors think fit.

7 Except to the extent allowed by section 58 of the Companies Act 1994, no part of the funds of the
company shall be employed in the purchase of, or in loans upon the security of, the company's
sha res.

Lien

8 The company shall have a lien on every share (not being a fully-paid share) for all moneys
(whether presently payable or not) called or payable at a fixed time in respect of that share, and
the company shall also have a lien on all shares (other than fully-paid shares) standing registered
in the name of a single person, for all moneys presently payable by him or his estate to the
company; but the directors may at any time declare any share to be wholly or in part exempt from
the provisions of this clause. The company's lien, if any, on a share shall extend to all dividends
payable thereon.

9 The company may sell, in such manner as the director thinks fit, any shargs on which the company
has a lien, but no sale shall be made unless some sum in respect of which the lien exists is
presently payable, nor until the expiration of fourteen days after a notice in writing stating and
demanding payment of such part of amount in respect of which the lien exists as is presently
payable, has been given to the registered holder for the time being of the share, or the person
entitled by reason of his death or insolvency to the share.

10. The proceeds of the sale shall be applied in payment of such part of the amount in respect of
which the lien exists as in presently payable, and the residue shall (subject to a like lien for sums
not presently payable as existed upon the shares prior to the sale) be paid to the person entitled
to the shares at the date ofthe sale. The purchaser shall be registered as the holder ofthe shares,
and he shall not be bound to see to the application of the purchase-money, nor shall his title to
the shares be affected by any irregularity or invalidity in the proceedings in reference to the sale.

Calls on Shares

11. The directors may from time to time make calls upon the members in respect of any moneys
unpaid on their shares, provided that no callshall exceed one-fourth of the nominal amount of the
share, or be payable at less than one month from the last call; and each member shall (subject to
receiving at least fourteen days' notice specifying the time or times of payments) pay to the
company at the time or times so specified the amount called on his shares.

12. The joint-holders of a share shall be jointly and severally liable to pay all calls in respect thereof

13. lf a sum called in respect of a share is not paid before or on the day appointed for payment
thereof, the person from whom the sum is due shall pay interest upon the sum at the rate of five
per cent, per annum from the day appointed for the payment thereof to the time of the actual
payment, but the directors shall be at liberty to waive payment of that interest wholly or in part.

?? I 1lr {', ,.
L- * |
,'
|
 Corporate Laws and Practices

1.4. The provisions of these regulations as to payment of interest shall apply in the case of non-
payment of any sum which, by the terms of issue of a share, becomes payable, at a fixed time,
whether on account of the amount of the share, or by way of premium.

15. The directors may make arrangements on the issue of shares for a difference between the holders
in the amount of calls to be paid and in the times of payment.

16. The directors may, if they think fit, receive from any member willing to advance the same all or
any part of the moneys uncalled and unpaid upon any shares held by him; and upon all or any of
the moneys so advanced may (until the same would, but for such advance, become presently
payable) pay Interest at such rate (not exceeding, without the sanction of the company in general
meeting, six per cent) as may be agreed upon between the member paying the sum in advance
and the directors.

Forfeiture of Shares

17. lf a member fails to pay any call or installment of a call on the day appointed for payment thereof,
the directors may, at any time thereafter during such time as any part of such call or installment
remain unpaid, serve a notice on him requiring payment of so much of the call or installment as is
unpaid, together with any interest which may have accrued.

18. The notice shall name a further day (not earlier than the expiration of fourteen days, from the
date of the notice) on or before which the payment required by the notice is to be made, and shall
state that, in the event of non-payment at or before the time appointed, the shares in respect of
which the callwas made will be liable to be forfeited.

19. lf the requirements of any such notice as aforesaid are not complied with, any share in respect of
which the notice has been given may at any time thereafter, before the payment required by the
notice has been made, be forfeited by a resolution of the directors to that effect.

20. A forfeited share may be sold or otherwise disposed of on such terms and in such manner as the
directors think fit, and at any time before a sale or disposition, the forfeiture may be cancelled on
such terms as the directors think fit.

2L. A person whose share have been forfeited shall cease to be a member in respect of the forfeited
shares, but shall, notwithstanding, remain liable to pay to the company all moneys which, at the
date of forfeiture, were presently payable by him to the company in respect of the shares, but his
liability shall cease if and when the company received payment in full of the nominal amount of
the shares.

22. A duly verified declaration in writing that the declarant is a director of the company has been duly
forfeited on a date stated in the declaration, shall be conclusive evidence of the facts therein stated as
against all persons claiming to be entitled to the share, and that declaration, and the receipt of the
company for the consideration, if any, given for the share on the sale or disposition thereof, shall
constitute a good title to the share, and the person to whom the share is sold or disposed of shall be
registered as the holder of the share and shall not be bound to see to the application of the purchase
money (if any), nor shall his title to the share be affected by any irregularity or invalidity in the
proceedings in reference to the forfeiture, sale or disposal of the share.
 Corporate Laws and Practices

23. The provisions of these regulations as to forfeiture shall apply in the case of non-payment of any
sum which, by the terms of issue of a share, becomes payable at a fixed time, whether on account
of the amount of the share, or by way of premium, as if the same had been payable by virtue of a
call duly made and notified.

Conversion of Shares into Stock

24. The directors may, with the sanction of the company previously given in general meeting, convert
any paid-up shares into stock, and may with the like sanction re-convert any stock into paid-up
shares of any denomination.

25. The holders of stock may transfer the same, or part thereof, in the same manner, and subject to
the same regulations, as and subject to which, the shares from which the stock arose might
previously to conversion have been transferred, or as near thereto as circumstances admit, but
the directors may from time to time fix the minimum amount of stock transferable, and restrict or
forbid the transfer of fractions of that minimum, but the minimum shall not exceed the nominal
amount of the shares from which the stock arose, and may also prohibit or restrict the transfer of
such stock.

26. The holders of stock shall, according to the amount of the stock held by them, have the same
rights, privileges and advantages as regards dividends, voting at meetings of the company, and
other matter, as if they held the shares from which the stock arose, but no such privilege or
advantage (except participation in the dividends and profits of the company)shall be conferred by
any such aliquot part of stock as would not, if existing in shares, have conferred that privilege or
advantage.

27. Such of the regulations of the company (other than those relating to share-warrants), as are
applicable to paid-up shares shall apply to stock, and the words, 'share' and "share-holder"
therein shall include "stock" and "stock-holder".

Share-warrants

28. The company may issue share-warrants, and accordingly the directors may in their discretion, with
respect to any share which is fully paid up, on application in writing signed by the person
registered as holder of the share, and authenticated by such evidence (if any) as the directors may
from time to time require as to the identity of the person signing the request, and on receiving the
certificate (if any) of the share, and the amount of the stamp-duty on the warrant and such fee as
the directors may from time to time require, issue under the company's seal a warrant, duly
stamped, stating that the bearer of the warrant is entitled to the shares therein specified and may
provide by coupons or otherwise for the payment of dividends, or other moneys, on the shares
included in the warrant.

29. A share-warrant shall entitle the bearer to the shares included in it, and the share shall be
transferred by the delivery of the share-warrant, and the provisions of the regulations of the
company with respect of transfer and transmission of shares shall not apply thereto.

30. The bearer of a share-warrant shall, on surrender of the warrant to the company for cancellation,
and on payment of such sum as the directors may from time to time prescribe, be entitled to have

24lt3 lt g *
 Corporate Laws and Practices

his name entered as a member in the register of members in respect of the shares included in the
warrant.

31. The bearer of a share-warrant may at any time deposit the warrant at the office of the company,
and so long as the warrant remains so deposited, the depositor shall have the same right of
a requisition for calling a meeting of the company, and of attending and voting and
signing
exercising the other privileges of a member at any meeting held after the expiration of two clear
days from the time of deposit, as if his name were inserted in the register of members as the
holder of the shares included in the deposited warrant. Not more than one person shall be
recognized as depositor of the share-warrant. The company shall, on two days' written notice,
return the deposited share-warrant to the depositor.

32. Subject as herein otherwise expressly provided, no person shall, as bearer of a share-warrant, sign
a requisition for calling a meeting of the company, or attend, or vote or exercise any other
privilege of a member at a meeting of the company, or be entitled to receive any notices from the
company; but the bearer of a share-warrant shall be entitled in all other respects to the same
privileges and advantages as if he were named in the register of members as the holder of the
shares included in the warrant, and he shall be a member of the company.

33. The directors may, from time to time, make rules as to the terms on which (if they shall think fit) a
new share-warrant or coupon may be issued by way of renewal in case of defacement, loss or
destruction.

Alteration of Capital

34. The directors may, with the sanction of the company in general meeting, increase the share
capital by such sum, to be divided into shares of such amount, as the resolution shall prescribe.

35. Subject to any direction to the contrary that may be given by the resolution sanctioning the
increase of share capital, all new shares shall, before issue, be offered to such persons as at the
date of the offer are entitled to receive notices from the company of general meetings in
proportlon, as nearly as the circumstances admit, to the amount of the existing shares to which
they are entitled. The offer shall be made by notice specifying the number or shares, offered, and
limiting a time within which the offer, if not accepted, will be deemed to be declined, and after
the expiration of that time, or on the receipt of an intimation from the person to whom the offer
is made that he declines to accept the shares offered, the directors may dispose of the same in
such manner as they think most beneficialto the company. The directors may likewise so dispose
of any new shares which (by reason of the ratio which the new shares bear to shares held by
persons entitled to an offer of new shares) cannot, in the opinion of the directors, be conveniently
offered under this article.

36. The new shares shall be subject to the same provisions with reference to the payment of calls,
lien, transfer, transmission, and forfeiture and otherwise as the shares in the original share capital.

37. The company may, by ordinary resolution, -

a consolidate and divide its share capital into shares of larger amount than its existing
shares;
 Corporate Laws und Practices

b by sub-division of its existing shares or any of them, divide the whole or any part of its share
capital into shares of smaller amount than is fixed by the memorandum of association,
subject, nevertheless, to the provisions of paragraph (d) of sub-section (1) of Section 53 of
the Companies Act 1994;
c cancel any shares which, at the date ofthe passing ofthe resolution, have not been taken or
agreed to be taken by any person.

38. The company may, by special resolution, reduce its share capital in any manner and with, and
subject to any incident authorized and consent required, by law].

Questions for discussions:

Question ABC Company Limited, a public listed company owns 80% shares of XYZ Company' ABC is
about to raise it's paid up capital and shall issue 200,000 new shares. Can XYZ Company
apply to purchase those shares?

Answer: As per Section 58 of the Companies Act, no company limited by share shall have any power
to buy its own shares or the shares of a public company of which it is a subsidiary company.
So, in terms of the said section, XYZ Company cannot purchase the shares of ABC Company
Limited.

Question: ABC Company Limited, a public listed company owns 99% shares of XYZ lnvestments
Limited. ABC Company Limited has applied to BSEC for lssuance Rights Share and appointed
XYZ lnvestments Limited as an Underwriter to the lssue to subscribe 65% of the shares
which may not be subscribed by the shareholders. What will be the consequence regarding
the appoint of XYZ lnvestments Limited as an Underwriter to the lssue?

Answer: As per Section 58 of the Companies Act, 1994 no company limited by share shall have any
power to buy its own shares or the shares of a public company of which it is a subsidiary
company. So, in terms of the said section, XYZ lnvestments Limited cannot purchase the
shares of ABC Company Limited except in the scenario as approved under Section 58 of the
Companies Act. Therefore, appoint of XYZ lnvestments Limited as an Underwriter to the
Rights Share issue of ABC Company Limited shall not be valid.
 Corporate Laws and Practices

BOARD OF DIRECTORS

Formation of the Board

We know that a company is an artificial person created by law and it does not have any physical
existence. As such, it cannot act itself. The persons through whom it acts are known as directors. The
directors of a company are collectively known as the "Board of Directors". The Board must be properly
constituted to transact the business of the company validly. lnvalidly constituted board cannot bind the
company by its acts. However, under certain circumstances, the acts of the directors who have been
invalidly appointed would be valid, if the irregularity in appointment is discovered subsequently,
Regarding validity of the act of director section 98 of The Companies Act, L994 states the following:

The acts of a director shall be valid notwithstanding any defect that may afterwards be discovered in this
appointment or qualification:

Provided that nothing in this section shall be deemed to give validity to act done by a director after the
appointment of such director has been shown to be invalid.

Regulation 95 of Schedule-l of The Companies Act, 1994 which is compulsory states as follows:

All acts done by any meeting of the directors or of a committee of directors or of a committee of
directors or by any person acting as a director, shall, notwithstanding that it be afterwards discovered
that there was some defect in the appointment of any such directors or persons acting as aforesaid, or
that they or any of them were disqualified, be as valid as if every such person had been duly appointed
and was qualified to be a director.

These provisions of the law do not apply to the case of a director:

1. whose term of office has expired but continues to act as a director

2. who from the beginning knew that his appointment was defective

However, the defect in the information of the board cannot adversely affect the right of the outsiders
who have no knowledge of defects. A person ignorant of irregularity in the information of the board, can
claim protection.

Number of directors:

Section 90(1) of The Companies Act, 1994: Every public company and every private company which is
subsidiary of a public company, shall have at least three directors.

Section 90(2) of The Companies Act, 1994: Every private company other than a private company
mentioned in section 90(1), shall have at least two directors.

Section 90(3) of The Companies Act, 1994: Only natural person can be appointed as directors

17 lD-.-.,
Z/ | I {I }l g
 Corporate Laws snd Practices

The remuneration of the directors shall from time to time be determined by the company in general
meeting. The qualification of a director shall be the holding of at least one share in the company, and it
shall be his duty to comply with the provisions of Section 97of the Companies Act, 1994.

Appointment of directors:

First directors are usually named in the articles of association. Section 91 of The Companies Act, 1994
states the followings:

1. Notwithstanding anything contained in the articles of a company -

(a) the subscribers of the memorandum shall be deemed to be the directors of the company until
the first directors are appointed;

(b) the directors of the company shall be elected by the members from among their number in
general meeting; and

(c) any casual vacancy occurring among the directors may be filled in by the other directors but the
person appointed shall be a person qualified to be elected as a director under clause (b) and
shall be subject to retirement at the same time as is he had become a director on the day on
which whose place he is appointed was last appointed as a director.

2. Notwithstanding anything contained in the articles of a company other than a private company
not less than one third of the whole number of directors shall be the persons whose period of
office is liable to determination at any time by retirement of directors' rotation.

lf the articles of association do not name the directors but specify qualification shares of directors,
subscribers shall be first directors. According to section 97(1), directors must take up qualification shares
within 60 days of appointment or within such shorter time as may be fixed by the articles.

Regulation 79 of The Companies Act, l-994 states that at the first ordinary meeting of the shareholders,
the whole of the directors shall retire from office, and at ordinary meeting in every subsequent year,
one- third of the directors for the time being, or if their number is not three or a multiple of three, then
the number nearest to one- third shall retire from office.

Regulation 80 states that the directors to retire in every year shall be those who have been longest in
the office since their last election, but as between the persons who became directors on the same day;
those to retire shall, unless they otherwise agree among themselves, be determined by lot. A retiring
director shall however be eligible for re-election.

The company at the general meeting, at which a director retires in a manner as aforesaid may fill the
vacated office by electing a person thereto.

As per section t7(2) of Companies Act, 1994 regulations 79, 80, 81 & 82 are compulsory for public
company but not for private company, unless it is not a subsidiary of a public company.
 Corporate Laws und Practices

Consent of directors:

Every director has to sign a consent form (Form lX) and file the same with Registrar of Joint Stock
Companies and Firms. Section 93 of the Act states as follows:

1'. every person, proposed to as a candidate for the office of a director shall sign, and file with the
company, his consent in writing to act as a director, if appointed.

2. A person shall not act as a director of the company unless he has, within thirty days of his
appointment, signed and filed with the Registrar his consent in writing to act as such director.

Powers and duties of the Directors

71'. The business of the company shall be managed by the directors, who may pay all expenses
incurred in getting up and registering the company, and may exercise all such powers of the
company as are not, by the Companies Act, 1994, or any statutory modification thereof for the
time being in force, or by these articles, required to be exercised by the company in general
meeting subject nevertheless to any regulation of these articles, to the provisions of the said Act,
and to such regulations being not inconsistent with the aforesaid regulations or provisions, as may
be prescribed by the company in general meeting; but no regulation made by the company in
general meeting shall invalidate any prior act of the directors which would have been valid if that
regulation had not been made.

72 The directors may from time to time appoint one or more of their body to the office of managing
director or manager for such term, and at such remuneration (whether by way of salary, or
commission, or participation in profits, or partly in one way and partly in another) as they may
think fit, and a director so appointed shall not, while holding that office, be subject to retirement
by rotation, or taken into account in determining the rotation of retirement of directors, but his
appointment shall be subject to determination 'ipso facto' if he ceases from any cause to be a
director, or if the company in general meeting resolve that his tenure of the office of managing
director or manager be determined.

73 The amount for the time being remaining undischarged of moneys borrowed or raised by the
directors for the purposes of the company (otherwise than by the issue of share capital) shall not
at any time exceed the issued share capital of the company without the sanction of the company
in general meeting.

74 The directors shall duly comply with the provisions of the Companies Act,1994, or any statutory
modification thereof for the time being in force, and in particular with the provisions in regard to
the registration of the particulars of mortgages and charges affecting the property of the company
or created by it, and to keeping a register of the director and to sending to the Registrar an annual
list of members, and a summary of particulars relating thereto and notice of any consolidation or
increase of share capital, or conversion of shares into stock, and copies of special resolutions and a
copy of the register of directors and notifications of any changes therein.

291?*9,*
 Corporate Luws and Practices

75 The directors shall cause minutes to be made in books provided for the purpose:
a. of all appointments of officers made by the directors,
b. of the names of the directors present at each meeting of directors and of any committee of
the directors,
c. of all resolutions and proceedings at all meeting of the company, and, of the directors, and
of committees of directors.

and every director present at any meeting of directors or committee of directors shall sign his name in a

book to be kept for that purpose.

Board Meetins

A company is an artificial person. lt exists in the eyes of the law and cannot act on its own. lt has to act
through a board of directors elected by the shareholders. A company incorporated under the Companies
Act has a distinct legal existence quite independent the shareholders. The directors are the
representatives of the shareholders and the companies are managed through directors. The board
meetings are important because the matters relating to the company and its policy are discussed and
decided the board meetings, The Companies Act, 1994 has given discretion to the directors to frame
rules and regulations concerning meetings, where they should meet and how their meetings should be
regulated. However, if the directors are unable to exercise the powers vested on them, the company
may exercise such powers in general meeting of the shareholders. The procedures of dealing with the
issues by the directors in one company may differ within the legal frame with that of other company.
The scope of business to be done by the board depends upon the provisions in the articles of the
respective company and The Companies Act, l-994.

Matters within the power

The Articles delegate powers to the board of the directors and not to any individual or to a number of
individuals by name. Therefore, the directors must meet together as a board in order to discharge their
duties. Directors must act together at a properly convened meeting presided over by a Chairman.

Itlustration: Where six directors out of nine met in a different capacity and for different purpose, such
meeting is not a board meeting. Directors can meet under informal circumstances. lf all the directors
meet casually in a club it cannot be treated as board meeting at the option of one against the will of the
other.

Usually articles of a company contain provisions as described below:

"A resolution in writing signed by the directors required to form a quorum for the time being in
Bangladesh shall be effectual as a resolution passed at a meeting of directors duly convened and held."

Section 108(1Xf) of The Companies Act, l-994 states the followings

The office of director shall be vacated, if he absents himself from three consecutive meetings of the
directors or from all meetings of the directors for continuous period of three months whichever is
longer, without leave of absence from the board of directors.

30 1}r*g*
 Corporate Laws and Practices

Therefore, it is not necessary for a director to attend in every board meeting. He may attend as often as
possible. A director who attends the meeting must act honestly, use fair and reasonable diligence in the
management of the company. A director cannot be held responsible for any misfeasance committed by
other directors for an act at meeting in which he was absent or he had no knowledge of it.

ln the absence of clear provision in the Act or memorandum or articles or resolution, powers of
directors depend on surrounding circumstances.

Restrictions on power of directors

According to section 1.07 of The Companies Act, 1994 the directors of a public company or of a
subsidiary of public company shall not, except with the consent of the company in a general meeting:

. Sell or dispose of the undertaking of the company; and

. Remit any debt due by a director.

Circumstances when telephonic conversation and informal discussion become board's discussion

Sometimes decisions are taken by the board on the basis of conversation over telephone or informal
discussion among themselves. Such telephonic conversation or discussion is not considered as a meeting
within the meaning of the Act. However, telephonic conversation and informal discussion may be
treated as a resolution subject to provision in the articles and when all the directors sign a resolution
based on such conversation or discussion.

Resolution through circular solution

lf it is provided in the articles, the director may pass a resolution by circulation, signed by all the
directors without convening a Board Meeting. Such a circular resolution must be recorded in the
immediate following Board Meeting and will be incorporated as a part of the minutes of the said Board
Meeting. The articles may allow directors to act otherwise than in a meeting. lf the articles so provide, a
resolution in writing signed by allthe directors for the time being in Bangladesh shall be as valid as if it
had been passed at a meeting duly convened and held. The fact that directors should act as "combined
wisdom" is satisfied where they give consent with full knowledge though they do not meet at any one
place. Such signed resolution is inserted in the directors' minute book. The resolutions of the board,
even if passed by minority at a meeting are binding on all the directors and all of them are bond by
decisions in the meeting.

A circular resolution is usually drafted in loose leaf from and one copy is distributed to each director
who signs and returns the same to the secretary or chairman. The date of adoption resolution is usually
taken at the date on which last copy of the draft resolution signed by the director is received by the
secretary / chairman.
Directors usually act at board meeting, unless special powers are delegated to directors or committee of
the board. The articles usually contain some provisions relating to the meeting of board of directors.
Regulation 88 of schedule-1 of Companies Act provides as follows:

The directors may meet together for the disposal of business and adjourn or otherwise regulate their
meetings, as they think fit. Questions arising at any meeting shall be decided by majority of votes. ln

3l | ?;,: y, c
 Corporate Laws and Practices

case of an equality of votes, the Chairman shall have a second or casting vote. A director may, and the
secretary on the requisition of a director shall, at any time, summon a meeting of directors. However,
this regulation is not compulsory.

The Articles usually empower the directors for management of the company, they are the persons who
can deal with the matters assigned to them. Their decisions cannot be over ruled by general meeting of
the members, if the directors act in the interest of the company. A draft circular resolution is given in
appendix.

Tvpes of business not to be transacted bv Circular Resolution

Not all kinds of business can be transacted by circular resolution. When a director is interested in a
contract within the meaning of section 131, and the articles provide that a resolution in writing signed
by all the directors for the time being in Bangladesh should be as valid and effective as if it has been
passed at a meeting. A circular resolution approved by all directors including the interested director
shall not invalidate due to signature of interested director.

All business cannot be transacted by Circular Resolution, where the Companies Act provides a particular
business has to be transacted in a meeting of the board. Such as declaration of solvency shall have to be
made at a meeting of directors as per sec. 290, disclosure of interest in respect of contract as per sec
L30.

Formal board meeting. freouencv & interval as per Companies Act

According to section 96, the board of directors shall hold board meeting at least once in every three
months and at least four meetings in every year.

Prerequisite of formal board meetine

Necessitv of notice

The first requirement to hold a valid and formal board meeting is serving of notice of the meeting. The
directors are required to receive notice of the meeting to meet together. The notice must be given to
convene a meeting otherwise; the meeting becomes irregular & invalid. lf one or more of the directors
remain absent, the proceeding would be invalid, if the validity of a meeting of directors is questioned
due to non-service of the notice to all the directors. The burden to prove is upon him who alleges non-
service of notice.

Companies Act, 1994 does not prescribe the form of notice and mode of service of notice. The notice is
usually served in the company's letterhead, stating the date, times & place of the meeting.

According to section 95, notice of board meeting shall have to be given in writing to every director for
the time being in Bangladesh and at his address in Bangladesh.

As per compulsory regulations 1t2,'J,13, tL4, ttll and 116 of First Schedule of The Companies Act, 1994
the followings are applicable with regard to notice of the meeting:

Regulation 113: A notice may be given by the company to any member either personally or by sending it
by registered post to him to his registered address or, if he has no registered address in Bangladesh, to
the address, if any, within Bangladesh supplied by him to the company for giving of notice to him.

1?lF:ru'.*
 Corporate Laws und Pructices

Regulation 114: lf a member has no registered address in Bangladesh, and has not supplied to the
company an address within Bangladesh for the giving of notice to him, a notice addressed to him and
advertised in a newspaper circulating in the neighborhood of the registered office of the company shall
be deemed to be duly given to him on the day on which the advertisement appears.
Regulation 1-15: A notice may be given by the company to the joint holders of a share by giving the
notice to the joint-holder named first in the register in respect of the share.

Regulation 1L6: A notice may be given by the company to the persons entitled to a share in
consequence of the death or insolvency of a member by sending if through the post in a prepaid letter
addressed to them by name, or by the title of representatives of the deceased, or assignee of the
insolvent or by any like description, at the address, if any, in Bangladesh supplied for the purpose by
giving the notice in any manner in which the same might have been given if the death or insolvency had
not occurred.

Optional regulation 1'17 of schedule I of The Companies Act, 1994 relates to members only which states
that:

Notice of every general meeting shall be given in some manner herein before authorized to-

(a) every member of the company including bearers of share-warrants except those members who
have no registered address within Bangladesh and have not supplied to the company an
address within Bangladesh for the giving of notice to them and.

(b) every person entitled to a share in consequence of the death or insolvency of a member, who
but for his death or insolvency, would be entitled to receive notice of the meeting.

Notice need not to be in a specific form. When all the directors are present, service of notice becomes
obsolete. An informal notice calling a board meeting becomes valid provided none of the directors raise
any objection about non service of notice.

lf any director thinks that proper notice has not been given & he; does not complain of the same, the
resolution would be valid specially when he takes part in the proceedings.

The notice of company meetings is governed, in general, by following rules:

L. Notice is to be issued with due authority granted by the directors. For all purposes, only
directors are authorized to convene a meeting. The Company Secretary may issue notice for a
meeting, but his signature must be qualified by the words "by order of the Board."

2. Minimum length of notice required for:

sl. Type of Meeting Notice period
No,
A) Statutory meeting 21 days
B) nual General Meeting 14 days
c) Extraordinary General Meeting 21 days
D) Board meeting No specific time limit. However, this may be
specified in the Memorandum of Association of
the respective company.

33 lFage
 Corporate Laws and Practices

3. Though the Act is silent about the length of notice for board meeting, yet it should reasonably
be long and there should have reasonable interval of time between the date of notice and the
date of meeting. Every director has right to have a reasonable notice of meeting' lf a director is
willing to complain about the shortness of time of the notice s/he may do so. However, in
absence of any written guideline best practice is to follow the notice period of 1-4 days.

4. ln case of urgency, board may convene emergency meeting giving a shorter period of notice
provided that no objection is raised by any member of the Board.

5. The notice shall be in writing

6. As per section 85(1Xa) a meeting may be called by a shorter notice if it writing:

is agreed in

i. in case of an annual general meeting, if all members entitled to attend and vote thereat
agree to it; and

ii. in case of any other meetings if the members holding not less than 95% of the paid up
capital of the company and having right to vote at that meeting. lf the company has no
share capital if the members holding not less than 95% of the voting right exercisable at that
meeting.

7. The period of notice should be in clear days. This means that while determining the notice
period the day of serving the notice and the day of the relevant meeting should be excluded.

8. Apart from the agenda, the notice should clearly state the followings

* The chronological number of the meeting

* Date of the meeting

t Day of the meeting

t Time of the meeting, and

* Place of the meeting

g. Notice of the meeting of a company along with the statement of the business to be transacted
at the meeting shall be served on every member. lt is to be served on the followings:

a) Every shareholder (who resides in the country)

b) Legal representative of the deceased shareholder

c) Auditors of the company

d) Copy of the notice to be given to all directors.

10. Accidental omission to give notice to, or non-receipt of the notice by, any member of the
company shall not invalidate the proceedings at any meeting (Section 85(1Xb).

1L. As perschedule lof The CompaniesAct, Lgg4thefollowings are applicable with regard to notice
of the meeting:

34lP*ge
 Corporute Lahr and Practices

Regulation 113: A notice may be given by the company to any member either personally or by
sending it by registered post to him to his registered address or if he has no registered address in
Bangladesh, to the address, if any, within Bangladesh supplied by him to the company for the giving
of notice to him.

Regulation 114: lf a member has no registered address & he has not supplied to the company an
address within Bangladesh for the giving of notice to him, a notice addressed to him and advertised
in a newspaper circulating in the neighborhood of the registered office of the company shall be
deemed to be duly given to him on the day on which the advertisement appears.

Regulation 115: A notice may be given by the company to the joint holders of a share by giving the
notice to the joint-holder name first in the register in respect of the share.

Regulation 115: A notice may be given by the company to the persons entitled to a share in
consequence of the death or insolvency of a member by sending it through the post in a prepaid
letter addressed to them by name or by the title of representatives of the deceased, or assignee of
insolvent or by any like description, at the address, if any, in Bangladesh supplied for the purpose by
giving the notice in any manner in which the same might have been given if the death or insolvency
had not occurred.

Regulation 117: Notice of every general meeting shall be given in same manner here in before
authorized to -
(a) every member of the company including bearers of share-warrants except
those members who
have no registered address within Bangladesh and have not supplied to the company an address
within Bangladesh for giving of notices to them, and

(b) every person entitled to a share in consequence of the death or insolvency

of member who but
for his death or insolvency would be entitled to receive notice of the meeting;

Sisnatorv of notice

Regulation 88 of schedule i. of The companies Act, 1994 provides as follows:

A director may, and the secretary on the requisition of a director shall at any time,
summon a meeting of
directors.

Therefore, any director may sign the notice. However, usually notice of the meeting of directors
is
signed by a director or by secretary with the phrase "By order of the board,,.

Notice of meeting on fixed dates

It is not legally necessary to send notice of meeting on a fixed date. lf the articles provide
that the
meeting would be held at regular intervals or on a fixed day of the month (for
example 2nd Sunday of
every month at 10:00 a.m. at the Registered office of the Company and all the directors
are aware of
such decision). But even in such cases, it is better for the secretary to remind the
directors of the
meeting by sending a formal notice.

15 llr.,.,e
 Corporate Laws and Practices

Place of meetine:

Meeting of the board may be held at any place since the Act is silent regarding the place of meeting
which is decided by the board. But the place must not be chosen to prevent attendance of any member
of the Board.

Exception to notice

Notice need not be given under the following circumstances

(i) lf a director is out of the country, notice need not be given in the absence of express provisions
to the contrary in the articles

(ii) if the articles provide for meetings to be held at regular intervals, e.g. monthly or bi-monthly and
the time and place is fixed. Though in such case, notice is often sent to remind the director.

(iii) if all the directorsagree to meet to settle emergency issues and hold the meeting, the meeting
can be held notwithstanding the absence of notice.

Effect of not sivins notice

lf a meeting is convened without giving notice to all directors, the resolution passed at such meeting
may be invalid on an action by an aggrieved person. The transactions can however be ratified at a
subsequent meeting of a validly convened meeting.

A director is entitled to have notice of the meeting even if he is outside Bangladesh, if an arrangement
has been made with the company for sending such notice to him. The right to receive the notice cannot
be waived.

Aeenda of board meetine

As a matter of practice the businesses to be transacted in board meeting is stated in the notice. A
director is bound to attend a meeting of directors if he had notice when a meeting is going to be held
whether he knows the type of business is to be transacted or not. The board may deal with special
business, although notice need not contain such agenda. lt is however, suggested to obtain the consent
of the Chairman on agenda and to forward it together with the notice'

tllustrative aeenda of first board meeting

remuneration;

36lP*ge
 Corporate Laws and Practices

Usual agenda for subsequent meeting

meeting;

clause of memorandum).

Attendance & quorum for board meeting

Attendance: directors attending the meeting must sign the attendance register from which quorum will
be ascertained before starting of the business. ln practice, some companies take attendance by
obtaining signature on the resolution where names of the directors' present are recorded.

Quorum: is the minimum member of members required to enable a meeting to go into session validly
i.e' to conduct and vote on the business to be transacted in the meeting and must be present to make
the proceedings of the meeting valid.

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 Corporate Laws and Practices

Quorum not fixed bv articles

lf quorum is not prescribed by the articles, the majority of the directors will constitute a quorum. lf the
articles authorize the board of directors to fix quorum of directors and regulate its business, it also laid
down the rule of majority decision.

lllustration: Without fixing a quorum at a meeting, where all directors except one were present, the
board passed a resolution sanctioning the grant of a power of attorney to the general manager on
behalf of the company, the defendant contended that as no quorum for the directors meeting had been
fixed, so smaller body than all of the directors should act and therefore the power of attorney was
invalid as the resolution authorizing it was invalid. lt was held that ordinarily where no quorum has in
fact been fixed, the acts of a major part of the directors for the time being are valid; because there was
no such contrary provision in the articles.

Quorum as per articles & regulation of schedule 1

The articles usually contain provision about the number of directors required to constitute a quorum.

lllustration: The articles of a company provide that minimum number of directors shall be four and A, B
& C shall be first directors. The first directors shall have the power to appoint the other director. There
can be no valid board meeting until A, B and C appoint the fourth director.

Regulation 89 of schedule 1 (it is not compulsory) provides as follows:

The quorum necessary for the transaction of business of the directors may fixed by the directors; unless
so fixed shall be three if the number of directors is more than three.

Validitv of transaction bv less than quorum

A board meeting conducted with of a number of directors less than quorum prescribed by the articles is
invalid. The articles of a company made provision that the business of the company shall be conducted
by not less than six directors, therefore any resolution by less than five directors will become invalid.

Director leaving the meeting after giving attendance

When number of directors falls below the minimum number fixed for quorum due to departure of any
director giving his attendance in the meeting, the business carried, thereafter, will be invalid if the
articles do not clearly mention that quorum is not required throughout the meeting.

Director leaving the meeting in the middle of meeting:

The directors cannot transact business in meeting if at any time the number of directors present falls
below a quorum, although a quorum was present at the beginning of the meeting. Business at a meeting
may be started if quorum is present. There is no express indication in the Act. or regulation that quorum
is not necessary throughout the meeting. The quorum of the board is required at every stage of the
meeting. Unless a quorum is present the business transacted is void.

38 lFage
 Corporate Laws snd Practices

lllustration: Assuming that three directors forming quorum were present at the beginning, one of
whom left the meeting after giving attendance and before the proceedings started. The proceedings of
this meeting shall be invalid on the ground of quorum not being present throughout unless the articles
expressly provide otherwise to mean that quorum is not necessary throughout the meeting.

Conducting Board Meeting without quorum

Regulation 90 of schedule I of The companies Act, 1994 states the followings:

The continuing directors may act notwithstanding any vacancy in their body, but, if and so long as their
number is reduced below the number fixed by or pursuant to the regulations of the company as the
necessary quorum of directors, after may act for the purpose of increasing the number of directors to that
number or of summoning a general meeting of the company, but for no other purpose.

From the above it is clear that the existing directors can convene a valid meeting of directors only to co-opt
directors to increase their number of quorum, if their number has already fallen below quorum.

Restriction on interested director to form guorum

A director of a public company or a private company which is a subsidiary of public company cannot
vote for resolution in which he is interested. Such director cannot be counted towards a quorum for
meeting transacting such business.

Assumption of third party regarding proper quorum

Third party will not be affected by the invalidity of a meeting. objection regarding validity of the
proceeding of a company does not affect third parties. Third party may assume that everything was
done properly.

Chairman of Board Meetine

There must be a chairman of every meeting appointed strictly in accordance with the provisions of the
articles:

According to regulation 54 (not compulsory) of schedule 1, the board of directors shall select one of
their members as the Chairman who shall preside at every general meeting of the company provided
that the chairman and the Managing Director shall not be the same person.

Regulation 91: The directors shall determine the period for which the chairman shall hold office.

According to regulation 93, if the chairman is not present within 30 minutes, the member may elect
Chairman for that meeting.

However, these two regulations are also not compulsory as per sec L7(2).

The appointment of the Chairman in contravention of the articles is void. Where there is no provision
for a casting vote of a chairman in the articles, the chairman cannot give a casting vote. A Chairman does
not necessarily remain the Chairman simply because he is a director, he may be substituted by another
director.

39 lPage
 Corporate Laws and Practices

Where an agenda includes replacement of the Chairman, the Chairman whom to be replaced can
preside over the meeting. The other directors will vote for appointment of the new chairman in place of
the old chairman. Therefore, there is no conflicting situation.

Consequences when chairman leaves the meeting without adjournment.

lf the Chairman leaves the meeting without adjournment the remaining directors, if quorum is present,
may appoint a new chairman for that meeting to transact the rest of the business provided that it must
be proved that Chairman who left the meeting without adjournment violated his duty & acted
dishonestly,

Minutes of Board Meeting

It is very much essential record the actual terms of the resolutions as well as the language of the
minutes. Minutes are kept to record the proceedings of the meetings. According to section 89(1), every
company shall cause minutes of all proceedings of general meeting and meetings of its directors to be
entered in the books kept for that purpose.

Section 89(2): Any such minute, if purporting to be signed by the Chairman of the meeting at which the
proceedings were held, or by the Chairman of the next succeeding meeting shall be evidence of the
proceedings.

According to Regulation 76:

(1) The directors shall cause minutes to be made in books provided for the purpose

a. of all appointment of officers made by the directors;

b. of the names of directors present at each meeting of the directors and of any committee of the
directors;
c. of all resolutions and proceedings at all meetings of the company, and of the directors, and of the
com m ittee of directors.

(2) Every director present at any meeting of directors or committee of directors shall sign his name
in a book to be kept for that purpose.

Use of the Common Seal

77. The Common Seal of the company shall not be affixed to any instrument except by the authority
of a resolution of the board of directors, and in the presence of at least two directors and of the
secretary or such other person as the directors may appoint for the purpose, and those two
directors and secretary or other person as aforesaid shall sign every instrument to which the seal
of the company is so affixed in their presence.

Disqualifications of Directors

78. The office of director shall be vacated if the director-

(a) fails to obtain within the time specified in sub-section (1) of Section 97 of the Companies
Act, !994, or at any time thereafter ceases to hold, the share qualification, if any, necessary
for his appointment, or

40lPng*
 Corporute Laws snd Practices

(b) is found to be of unsound mind by a Court of competent jurisdiction, or

(c) is adjudged insolvent, or

(d) fails to pay calls made on him in respect of shares held by him within six months from the
date of such calls being made, or
(e) without the sanction of company in general meeting accepts or holds any office of profit of
under the company other than that of a managing director or manager or a legal or
technical adviser or a banker, or
(f) absents himself from three consecutive meetings of the directors or from all meetings of the
directors for a continuous period of three months, whichever is longer, without leave of
absence from the board of directors; or
(e) accepts a loan from the company; or
(h) is concerned or participates in the profits of any contract with the company; or
(i) is punished with imprisonment for a term exceeding six months:

Provided however, that no directors shall vacate his office by reason of his being member of any
company which has entered into contracts with or done any work for the company of which he is
director, but a director shall not vote in respect of any such contract or work, and if he does so vote his
vote shall not be counted.

Rotation of Directors:

Regulations 79 to 87 of schedule I of The Companies Act, 1994 states the followings

Regulation 79: At the first ordinary meeting of the company, the whole of the directors shall
retire from office, and at the ordinary meeting in every subsequent year one-third of the directors
for the time being or, if their number is not three or a multiple of three then the number nearest
to one-third shall retire from office.

Regulation 80: The directors to retire in every year shall be those who have been longest in
office since their last election, but as between persons who became directors on the same day
those to retire shall (unless they otherwise agree among themselves) be determined by lot.

Regulation 81: A retiring director shall be eligible for re-election

Regulation 82: The company at the general meeting at which a director retires in manner
aforesaid may fill up the vacated office by electing a person thereto.

Regulation 83: lf at any meeting at which an election of directors ought to take place, the places
of the vacating directors are not filled up, the meeting shall stand adjourned till the same day in
the next week at the same time and place, and, if at the adjourned meeting the places of the
vacating directors are not filled up, the vacating directors or such of them as have not had their
places filled up shall be deemed to have been re-elected at the adjourned meeting.

Regulation 84: Subject to the provisions of Sections 90 and 91 of the Companies Act, 1994l the
company may from time to time in general meeting increase or reduce the number of directors,
and may also determine in what rotation the increased or reduced number is to go out of office.

41 llla;re
 Corporate Laws and Pructices

Regulation 85: Any casual vacancy occurring on the board of directors may be filled up by the
directors, but the person so chosen shall be subject to retirement at the same time as if he had
become a director on the day on which the director in whose place he is appointed was last
elected a director. A director so chosen shall be known as an alternative director.

Regulation 85: The directors shall have power at any time, and from time to time, to appoint a
person as an additional director who shall retire from office at the next following ordinary general
meeting but shall be eligible for election by the company at that meeting as an additional director.

Regulation 87: The Company may by extraordinary resolution remove any director before the
expiration of his period of office and may by an ordinary resolution appoint another person in his
stead; the person so appointed shall be subject to retirement at the same time as if he had
become a director on the day on which the director in whose place he is appointed was last
elected a director.

Proceedings of Directors

Regulations 88 to 95 of schedule I of The Companies Act, 1994 states the followings

Regulation 88: The directors may meet together for the dispatch of business, adjourn and
otherwise regulate their meetings as they think fit. Questions arising at any meeting shall be
decided by a majority of votes. ln case of an equality of votes, the chairman shall have a second or
casting vote. A director may, and Secretary on the requisition of a Director shall, at any time,
summon a meeting of directors.

Regulation 89: The Quorum necessary for the transaction of the business of the directors may be
fixed by the directors, and unless so fixed shall (when the number of directors exceeds three) be
three, when the number of directors exceed three.

Regulation 90: The continuing directors may act notwithstanding any vacancy in their body, but, if
and so long as their number is reduced below the number fixed by or pursuant to the regulations
of the company as the necessary quorum of directors the continuing directors may act for the
purpose of increasing the number of directors to that number, or of summoning a general
meeting of the company but for no other purpose.

Regulation 91: The directors may elect a chairman of their meetings and determine the period for
which he is to hold office.

Regulation 92: The directors may delegate any of their powers to committees consisting of such
member or members of their body as they think fit; any committee so formed shall, in the exercise
of powers so delegated, conform to any regulations that may be imposed on them by the directors.

Regulation 93: A committee may elect a chairman of their meetings; if no such chairman is elected,
or if at any meeting the chairman is not present within thirty minutes after the time appointed for
holding the same, the members present nay choose one of their number to be chairman of the
meeting.

Regulation 94: A committee may meet and adjourn as they think proper. Questions arising at any
meeting shall be determined by a majority votes of the members present, and in case of an
equality of votes, the chairman shall have a second or casting vote.

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 Corporate Laws and Practices

Regulation 95: All acts done by any meeting of the directors or of a committee of directors, or by
any person acting as a director, shall, notwithstanding that it be afterwards, discovered that there
was some defect in the appointment of any such directors or persons acting as aforesaid, or that
they or any of them were disqualified, be as valid as if every such person had been duly appointed
and was qualified to be a director.

Questions for discussions:

Question A private company has four directors, namely 'A' (Managing Director), his wife 'B'
(Chairperson), his brother 'C' (overseas director) & his (A's) daughter 'D' (director who
is studying abroad). Overseas director resides in Canada & the company has given him
the assignment to promote overseas business. The articles provide that three directors
willform a quorum for the board meeting.

What should be done to validly convene the board meeting with quorum?

Answer For board meeting of a private company or public company the quorum is three
members where number of directors exceeds three (Regulation 89 of schedule 1).

However, regulation 89 is not compulsory for either private or public company. Given
the above provisions, the company may either alter the articles of association by
special resolution to reduce quorum for directors' meeting to two directors so that A &
his wife, B can convene board meeting with quorum; Or

The board may appoint alternate directors in place of 'N' & 'o' under section l_01
provided that the articles contain such provision. lf there is no such provision, an EGM
should be convene by appointing proxy by'N' &'o'. The proxy needs not be member if
the articles provides such provision,

Question Presently, Alfa Company Limited ("the Company") has three directors namely A, B and
C' Previously, the Company had five directors out of whom two directors namely D & E
(close friends of C) died in an accident. No other directors were appointed. According
to Articles of Association of the Company quorum for directors' meeting is three. C
resigned from the board due to the fact that his views and recommendations are not
considered by A & B. A & B intends to appoint M who is a shareholder of the Company
in the place of C. But C does not want to appoint M as a director of the Company. you
are required to answer:

i) When the resignation of C will be complete?

ii) what procedures should A & B follow to appoint M as a director of the company?

Answer i) Assuming th at C attends the board meeting (in which resignation of C is placed)
with A & B the meeting may pass resolution for acceptance of resignation of C
unanimousl

43 lFag*
 Corporate Laws and Practices

ii) Since A & B intends to appoint M who is a shareholder of the Company in the
place of C the meeting should be closed after passing one resolution i.e.
acceptance of resignation of C. As per regulation 90 of the Companies Act, 1994 A
& B can co-opt M in place of C to increase the number of directors to form
quorum. Accordingly, a separate board meeting will be convened in which
meeting M will be appointed as a director.

Question XYZ Company Limited was incorporated on September 15, 2015. No auditor(s) was
appointed by the Company till November L5, 2016. Please advise the Company
regarding appointment of the auditor(s).

Answer As per section 210(6) of The Companies Act, 1994:

The first auditor or auditors of a company shall be appointed by the Board of Directors
within one month from the date of registration of the company and the auditor or
auditors so appointed shall hold office until conclusion of the first annual general
meeting.

As per section 210(6Xb)

lf the directorsfailto exercise its powers undersection 210(6), the company in general
meeting, may appoint the first auditor or auditors.

Hence, as required by law XYZ Company Limited has failed to appoint the first
auditor(s) within one month. ln this situation an Extra-Ordinary General Meeting be
called before the Annual General Meeting to appoint the first auditor(s). lf this is not
done it will not be possible to place the audited accounts in the AGM. Therefore, the
provision of subsection 210(6) used the phrase "General Meeting" instead of "Annual
General Meeting".

Question Milestone Partners entered into an agreement relating to some significant issues with
Livingstone Company Limited (LCL) on January !, 20'1,6. Entering into the agreement
was duly approved in a duly convened board meeting of LCL held on December 30,
2015. Quorum for the purpose of the Board meeting of LCL is presence of five board
members and five board members were present in the relevant board meeting.
Subsequently, it was found that out of five of the directors forming quorum of the
board meeting in which entering into the agreement was approved, one director failed
to obtain the qualification shares within the regulatory time limit fixed on December
25,20L5 and as such his appointment as director at the time of board meeting was not
valid. Subsequently, the board of LCL declined to perform the obligations under the
contract entered with Milestone Partners on the plea that signing of the agreement
was not approved in a duly held board meeting of LCL because of lack of quorum and
as such is not valid. Give your advice on the defence available to Milestone Partners as
per provisions of the Companies Act, 1994.

44lFage
 Corporate Laws snd Practices

Answer Section 98 of the Companies Act, 1994 states that:

"The acts of a director shall be valid notwithstanding any defect that may afterwards
be discovered in his appointment of qualification".

Provided that nothing in this section shall be deemed to give validity to act done by a

director after the appointments of such director has been shown to be invalid.

Moreover, regulation 95 of the Companies Act, l-994 states that all acts done by any
meeting of the directors or of a committee of directors or by any person acting as a
director, shall, notwithstanding that it be afterwards discovered that there was some
defect in the appointment of any such directors or persons acting as aforesaid, or that
they or any of them were disqualified, be as valid as if every such person had been duly
appointed and was qualified to be the director.

ln light of the above provisions of the Companies Act, 1994 Milestone Partners will
have the right to claim that they did not have the scope to know the defects in the
formation of the board of LCL and as such may claim protection under the provisions
of the Companies Act, 1994.

Question The directors of a listed company convened board meeting before its AGM and
recommended 50% cash dividend for the year 20L5 and carried other business as
usually done in such board meeting before AGM. The recommendation of proposed
dividend was notified to the Stock Exchanges accordingly. The AGM was called and
adjourned for indefinite period. You are required to answer:

a ls the recommended dividend payable? Give proper argument in favor of your

answer

b. ls there any default in the above mentioned case by the Company within the
provisions of the Companies Act, 1994? Mention the relevant provisions of the law
in this regard.

c. What procedures to be followed to make the dividend payable?

Answer a) According to section 184(1)(c) the board of directors of the respective company
may recommend final dividend. The dividend becomes payable after the approval
of the shareholders in the AGM. As per Dhaka Stock Exchange (Listing) Regulations,
2015 the dividend shall be paid within 30 days from the date of approval by the
shareholders in the AGM. However, in the mentioned case the dividend has not
become payable since it has not been approved by the shareholders in the AGM.

b) The Chairman of the Board may with the consent of the meeting adjourn the
meeting. A valid adjournment cannot go beyond the date whichever date falls
earlier to be determined in the following way:

o Last day of the calendar year;

o Last day of 15 months from the date of previous AGM; or

45 lP*ge
 Corporate Laws and Practtces

a Last day of nine months (12 months in case of company having interest outside
Bangladesh) from the date of closure of the accounts.

However, in above case for the purpose of holding the AGM the applicable time for
notice period and record date shall be taken into account.

lf there is no objection about the adjournment, the shareholders have to wait till the
date which falls earlier as determined in the above way. lf the adjourned meeting is
not convened within that date, the shareholders may give requisition for EGM.

c) ln order to make the dividend payable by the company, two or more shareholders
holding not less than one tenth of the paid up capital may submit a requisition
under section 84 of the Companies Act, 1994 to hold EGM to approve the dividend
or they may apply to the Court under section 85(3) to hold the Annual General
Meeting if they think that the adjournment was not valid.

Question ABC Limited had five members in its Board of Directors. Three Board members present
in person fulfills quorum for a valid Board Meeting of the Company. ln a recent
accident three directors of the Company died. What procedures the Company should
follow to hold valid Board meetings?

Answer According to regulation 90 of schedule l, directors can convene a valid meeting of the
directors only to co-opt directors to increase the number of Board members to fulfill
quorum if their number has already fallen below the quorum or to summon a general
meeting of the company. Therefore, the existing directors can hold board meeting to
co-opt directors to increase their number to quorum and call general meeting for
appointment of the new directors.

Question ABC Company Limited was incorporated with authorized share capital of Tk.
10,000,000 comprising of l-,000,000 ordinary shares of Tk. 10.00 each. There were four
subscribers to the memorandum. 250,000 shares were shown against each subscriber
in the last page of M/A & A/A to maintain equal rights. Each subscriber consented to
take 250,000 shares in the company. The articles stated that qualification of a director
shall be holding shares of Tk. 25,000. The Company prepared its first accounts showing
paid up capitalTk. L00,000 (Tk, 25,000 X4). This was done since the subscribers did not
have sufficient capital in their wealth statement to show investment of Tk. 2,500,000
by each subscriber.

You are required to answer with proper argument in favor of your answer:

i) Whether the subscribers, who are directors, complied with the requirement of sec
92(1) (b) (ii) i.e. taken from the company & paid or agreed to pay for qualification
sha res?

ii) What action to be taken by the directors to fulfill the requirement of section 97(1)
of the Companies Act, 1994 regarding the qualification share?

46 lli*g*
 Corporate Luws and Pructices

iii) What will be the consequence for not complying with the requirement of section
97(1) of the Companies Act, 1994?

Answer i) The articles provided for qualification in terms of amount, not in terms of number
of shares. Therefore, provision of sec g2(lxbxii) of company Act has been
complied with.

ii) Since each subscriber agreed to subscribe for 250,000 shares of Tk. 10 each i.e. Tk.
2,500,000, therefore, they shall have to subscribe the full amount within 60 days
from the date of their appointment or such shorter period as may be fixed by the
articles of the company.

iii) lf the requirement of section 97(1) of the Companies Act, 1994 is not fulfilled the
directors will be listed as contributors on winding up. ln the annual return
(schedule X), shares may be shown as partly paid i.e. Tk. 1.oo per share for the
time being. ln such case the Registrar may refuse to approve issue of such partly
paid shares shown in the list of subscribers to the memorandum and articles of
association.

Question Board of Directors of ABC company Limited proposed cash dividend @ Tk. 5.00 per
ordinary share of Tk. 10.00 each. ln the Annual General Meeting some shareholders
suggested to declare
cash dividend @ Tk. 8.00 per ordinary share while some other
shareholders suggested that the cash dividend recommended by the Board @ Tk. 5.00
per share be converted into stock dividend. Explain how the Chairman of the meeting
should deal with the suggestions of the shareholders.

Answer As per provisions of Companies Act, l-994 the shareholders cannot increase the rate of
dividend beyond the rate which was recommended by the Board of Directors of the
company. However, the shareholders can approve lower rate of dividend. Even the
form of dividend can be changed i.e. cash dividend can be converted into stock
dividend and vice versa. Subject to compliance of the provisions of articles of
association of the company; the AGM can declare stock dividend @ Tk. 5.00 per share.

Question Presently, Alfa company Limited ("the company") has three directors namely A, B and
C. Previously, the Company had five directors out of whom two directors namely D & E
(close friends of C) died in an accident. No other directors were appointed. According
to Articles of Association of the Company quorum for directors' meeting is three. C
resigned from the board due to the fact that his views and recommendations are not
considered by A & B. A & B intends to appoint M who is a shareholder of the Company
in the place of C. But C does not want to appoint M as a director of the Company. you
are required to answer:

i) When the resignation of C will be complete?

ii) What procedures should A & B follow to appoint M as a director of the company?

47 lF*g*
 Corporate Luws and Practices

Answer i) Assuming that C attends the board meeting (in which resignation of C is placed)
with A & B the meeting may pass resolution for acceptance of resignation of C
unanimously.

ii) Since A & B intends to appoint M who is a shareholder of the Company in the
place of C the meeting should be closed after passing one resolution i.e.
acceptance of resignation of C. As per regulation 90 of the Companies Act, 1994 A
& B can co-opt M in place of C to increase the number of directors to form
quorum. Accordingly, a separate board meeting will be convened in which
meeting M will be appointed as a director.

Question Marine Dock Yard Limited is a private limited company having nine shareholders out of
whom five are members of the Board of Directors. ln the company's 7th board meeting,
three directors were present while the meeting was started. After giving attendance
and before starting the proceedings one director left. The articles of association of the
company remains silent as to how many directors will form quorum. Legally, are the
resolutions passed in the board meeting valid? Give arguments in favor of your
answer.

Answer Quorum is the minimum number of directors required to be present personally for
conducting a valid board meeting.

ln terms of regulation 89 of Schedule-l of The Companies Act, 1994 the directors may
fix a quorum necessary for the transactions of the business of the directors and unless
so fixed shall be three if the number of directors is more than three.

Although quorum was present at the beginning of the meeting as per Companies Act
1994, however, the proceeding of this meeting shall be invalid on the ground of non-
existence of quorum at the time of taking the resolutions.

48 lF*g*
 Corporate Laws and Practices

Members' Meetinss or Meetines of the Shareholders

Kinds of meetins:

Different kinds of meeting of the shareholders or members are:

A. Statutory meeting: The first meeting of the members of public company is known as statutory
meeting. Section 83(1) of The Companies Act, 1994 states as follows:

Every company limited by shares and every company limited by guarantee and having shares
capital shall, within a period of not less than one month and not more than six months from the
date at which the company is entitled to commence business, hold a general meeting of the
members of the company; in this Act such meeting is referred to as "the statutory meeting".

As per section 83(12) nothing of section 83 of The Companies Act shall apply to a private company.
This means that the only the public limited company is required to hold the statutory meeting only
once during its life time.

Section 83(2) of The Companies Act, 1994 states as follows

The Board of directors shall, in accordance with other provisions of this Act, prepare a report, in
this Act referred to as "statutory report" and shall at least 21, days before the day on which the
statutory meeting is to be held, forward the report to every member of the company.

Provided that if the report is forwarded latter than the time as is required above, it shall
notwithstanding that fact, be deemed to have been duly forwarded if any member entitled to
attend and vote at the meeting does not object to such forwarding.

Certification of statutory report

Section 83( ) of The Companies Act, 1994 states as follows:

The statutory report shall be certified as correct by not less than two directors of the company, one
of whom shall be the managing director where there is one.

As per section 83(5) of The Companies Act, 1994 so far as the report relates to the shares allotted
by the company, the cash received in respect of such shares and the receipts and payments of the
company, be certified by the auditors of the company regarding its correctness.

Duties of the secretarv relating to statutorv meetins:

The Company Secretary has to perform the following duties relating to statutory meeting:

o Collect all information required to fill up the statutory report as per prescribed form (Form Vll);
o comply with the requirements of section g3 of The companies Act, 1994;
o Prepare the statutory report in consultation with the Chairman & the Managing Director, if
there is any;

49jPage
 Corporate Laws und Practices

o Organize a board meeting for approval of the draft statutory report & fixation of date, time &
venue of statutory meeting;
o Obtain certification of auditors & two directors including the Managing Director (if any)
o Froward copy of the report to every member of the company at least 21 days before the day of
statutory meeting;
o File a copy of the statutory report with the Registrar of Joint Stock Companies immediately after
the statutory meeting;
o Prepare & produce a complete list of names & addresses of members of the company & number
of shares held by each member;
o Record the minutes of the proceedings of statutory meeting in the Members Minute Book,
. Keep copies of all contracts for inspection'

B. Annual general meeting: As per section 81 of The Companies Act, 1994 the followings are
applicable with regard to annual general meeting:

1. every company shall hold a general meeting as its annual general meeting in each year of the
Gregorian calendar;

2. Not more than fifteen months shall elapse between the date of one annual general meeting of a

company and that ofthe nexU

3. The first annual general meeting of a company may be held within a period of 18 months from
the date of its incorporation and if such general meeting is held within that period, it shall not
be necessary for the company to hold any annual general meeting in the year of its
incorporation or in the following year;

4. The Registrar may, on an application made by a company within thirty days from the date of
expiry of the period specified for holding the annual general meeting (not being the first annual
general meeting), extend the time by a period not exceeding 90 days or not exceeding 31't
December of the calendar year in relation to which the annual general meeting is required to
be held, whichever is earlier.

5. lf a company defaults in complying with the provisions as mentioned above, the Court may, on
the application of any member of the company, call or direct the calling of a general meeting of
the company and give such ancillary or consequential direction as the Court thinks expedient in
relation to the calling, holding and conducting the meeting.

6. Section 183(1) of The Companies Act, 1994 states the followings:

The Board of Directors of every company shall, at every annual general meeting held in
pursuance of section 81, lay before the company a balance sheet together with the profit and
loss account or in the case of a company not trading for profit, an income and expenditure
account for the period specified in sub-section (2) of this section.

50 lP*g*
 Corporute Laws and Practices

7. Section 183(2) of The Companies Act, 1994 states the followings:

The said profit and loss account or the income and expenditure account shall be prepared for
the following period, namely:

(a) in the case of the first general meeting for the period beginning with the date of
incorporation of the company and ending on a date which is within nine months preceding
the date of the meeting; and

(b) in the case of subsequent annual general meeting, for the period beginning with the date
immediately after last account and ending on a date which is-

(i) a date within nine months preceding such meeting; or

(ii) in the case of a company carrying or business or having interest outside Bangladesh, a
date within twelve months preceding the date of such meeting; or

(iii) in case where and extension of time has been granted for holding the meeting under
section 81, a date within the said nine or twelve months, as the case may be, preceding
the date of holding such meeting under that section.

Provided that the Register may, on an application being made to before the expiry of the said nine or
twelve months, extended the period by a period not exceeding three months.

According to section 183(4) the accounts shall have to be prepared for one financial year which may be
more or less than a calendar year but shall not exceed 15 months except when the Registrar grants
extension up to 18 months. Again according to section 183(2) the accounts which will be presented to
AGM will relate to a period not beyond nine months proceeding to the date of AGM or twelve months
for companies having business or interest outside Bangladesh.

Factors affecting the countins of interval between two consecutive AGMs

When the Court condones delay: When the Court condones delay in holding the AGM according to
sec.
81(1), the time frame described in that sub-section for holding AGM becomes ineffective. The
new
schedule starts from the date of holding the AGM as per order of the Court and the L5 months, interval
should be counted from that date.

When the Registrar extends the time for presentation of accounts in the AGM as well as the time for
preparation of accounts, therefore, in special cases, the Registrar can extend the
time under sec. 1g3(4)
up to 18 months.

According to sec. 183, accounts shall have to submit before the AGM. The accounts shall relate to a
period not before nine months of the AGM i.e. within a period prescribed in section gL,
whenever the
AGM is held (within L8 months of incorporation or within 15 months of proceeding AGM).

The object of convening AGM is to consider the balance sheet & profit and loss account.
Accounts have
not been prepared or audit of accounts has not been completed cannot be valid reason for not
convening the ordinary general meeting.

51lt);rge
 Corporate Laws and Pructices

Notice of AGM:

According to sec.85(1)(a) fourteen days' notice in writing shall have to be given for AGM
notwithstanding any provision in the articles of association. However, an AGM may be convened with
the consent of all the members entitled to receive the notice of the meeting by a shorter notice as they
think fit [Sec 85 (rXaXi)].

Notice of the meeting of a company with a statement of the business to be transacted at the meeting
shall be served on every member in a manner in which notices are required to be served by schedule l,
but accidental omission to give notice to, or the non receipt of notice by any members shall not
invalidate the proceedings at any meeting. lf the articles make clear provision regarding business to be
transacted at AGM, notice need not describe the business to be transacted at AGM.

Where a director does not hold any share he is not entitled to notice of general meeting.

C. Extraordinary General Meeting

According to section 84(1), notwithstanding anything contained in the articles,

a)the directors of a company, having share capital shall on the requisition of the holders of not
Iess than one tenth on the issued share capital of the company upon which all calls or other
sums then due have been paid, forthwith proceed to call an extraordinary general meeting of
the company, and

b) in the case of a company not having a share capital the directors thereof shall call such
meeting on the requisition of such members as have on the date of submitting the requisition,
not less than one tenth of the total voting power in relation to the issues on which the
meeting is called.

According to section 84(3)

The directors shall call the meeting within 21 days from the date of deposit of the requisition
which is to be held within 45 days from the date of deposit of the requisition. Otherwise, the
requisitionists themselves or majority of them may convene the meeting within 3 months from
the date of the deposit of the requisition.

The directors may, whenever they think fit, call an extraordinary general meeting, and
extraordinary general meetings shall also be called on such requisition, or in default, may be called
by such requisitionists, as provided by Section 84 of The Companies Act, 1994. lf at any time there
are not within (Bangladesh) sufficient directors capable of acting to form a quorum, any director
or any two members of the company may call an extraordinary general meeting in the same
manner as nearly as possible as that in which meeting may be called by the directors.

Proceedings at General Meeting

All business shall be deemed special that is transacted at an extraordinary meeting, and all that is
transacted at an ordinary meeting are sanctioning a dividend, the consideration of the accounts,
balance sheets and the ordinary report of the directors, and auditors, the election of directors and

52 | l' :t :,:. t.:

 Corporate Laws and prscttces

other officers in the place of those retiring by rotation, and the fixing
of the remuneration of the
a ud ito rs.

No business shall be transacted at any general meeting unless a quorum

of members is present at
the time when the meeting proceeds to business; save as therein otherwise provided, (two
members in the case of a private company and five members in the case
of any other company)
personally present shall form a quorum.

lf within half an hour from the time appointed for the meeting a quorum is not present, the
meeting, if called upon the requisition of members, shall be dissolved; in
any other case, it shall
stand adjourned to the same day in the next week at the same time and place,
and, if at the
adjourned meeting a quorum is not present within half an hour from the
time appointed for the
meeting, the members present shall be a quorum.

The chairman selected among them by the Board of Directors

shall preside as chairman at every
general meeting of the company. Provided that the chairman
and the Managing Director shall not
be the same person.

lf there is no such chairman, or if at any meeting he is not present

within thirty minutes after the
time appointed for holding the meeting, or is unwilling to act as chairman,
the members present
shall choose some one of their number of be chairman.

The chairman may with the consent of any meeting at

which a quorum is present (and shall if so
directed by the meeting), adjourn the meeting from time to
time and from place, but no business
shall be transacted at any adjourned meeting other than the
business left unfinished at the
meeting from which the adjournment took place. when a meeting
is adjourned for ten days or
more, notice of the adjourned meeting shall be given as in the
case of an original meeting. save as
aforesaid, it shall not be necessary to give any notice of an
adjournment or of the business to be
transacted at an adjourned meeting.

At any general meeting a resolution put to the vote of the meeting

shall be decided on a show of
hands unless a poll is (before or on the declaration of the
result of the show of hands) demanded
(in accordance with the provisions of clause (c) of
sub-section (1) of section g5 of The companies
Act L994) and unless a poll is so demanded, a declaration by the
chairman that a resolution has,
on a show of hands, been carried unanimously, or by a particular
majority, or lost, and an entry to
that effect in the book of proceeding of the company shall be
conclusive evidence of the fact,
without proof of the number or proportion of the votes recorded
in favor of, or against, that
resolution.

lf a poll is duly demanded, it shall be taken in such manner

as the chairman directs, and the result
of the pollshall be deemed to be the resolution of the meeting
at which the pollwas demanded.

ln the case of an equality of votes, whether on a show of

hands or on a poll, the chairman of the
meeting at which the show of hand takes place, or at which
the poll is demanded, shall be entitled
to a second or casting vote.

A poll demanded on the election of a chairman or on a question

of adjournment shall be taken
forthwith' A poll demanded on any other question shall be taken
at such time as the chairman of
the meeting directs.

53 li]*g*
 Corporate Luws and Practices

Votes of Members

On a show of hands every member present in person shall have one vote. (On a poll every member shall
have one vote in respect of each share or each hundred (Taka) of stock held by him.

ln the case of joint holders, the vote of the senior who tenders a vote whether in person or by proxy,
shall be accepted to the exclusion of the votes of the other joint-holders; and for this purpose seniority
shall be determined by the order in which the names stands in the register of members.

A member of unsound mind, or in respect of whom an order has been made by any Court having jurisdiction
in lunacy, may vote, whether on a show of hands or on a poll, by his committee or other legal guardian, and
any such committee or guardian may, on a poll vote by proxy.

No member shall be entitled to vote at any general meeting unless all calls or other sums presently
payable by him in respect of shares in the company have been paid.

On a poll votes may be given either personally or by proxy: Provided that no company shall vote by
proxy as long as a resolution of its directors in accordance with the provisions of Section 86 of the
Companies Act,1994, is in force.

The instrument appointing a proxy shall be in writing under the hand or the appointer or of his attorney
duly authorized in writing, or, if the appointer is a corporation either under the common seal, or under
the hand of an officer or attorney so authorized.

General Rules of Members' Meeting:

r Notice to be issued on the authority specified in the articles and served in the prescribe
manner.
o Notice to be given to every person entitled to receive notice'
o Though notice need not be given if all entitled to attend are present, yet such notice is issued
to comply with formalities. Absence from the recorded address of a person entitled to attend a
meeting is not good reason for not serving the notice.
o Though one member may have informed the company that he is unable to remain present, yet
notice shall have to be given.
o The proper period of meeting, (date, hour, day and place of meeting) must be stated in notice.
As per sections 78 and 79, notice must contain the name of the company.
o The nature of the business to be transacted must be disclosed in notice.
r The validity of resolution passed in a meeting may be questioned if the notice were faulty.
o lt is essential that notice must be frank, open, clear, satisfactory and free from trickiness'
o Notice must not be contingent or conditional. lt must be absolute.
r Notice of adjourned meeting need not be given if the meeting adjourned for less than ten days
(Regulation 56, schedule-1). ln spite of the noncompliance of requirements of articles & Act, if
every member is present at the meeting & any resolution passed unanimously which is not
ultra vires the company, is valid and binding on the company, irrespective of what notice, if
any, of the meeting was given.

54 li);;i;
 Corporate Laws and Pructices

Quorum at members' meeting:

Quorum is the minimum number of members required to be present personally for conducting a valid
meeting provided proxy towards quorum may be counted if permitted by the articles of association.

Quorum as per articles:

The articles usually contain a provision regarding quorum that must be present to start the business at a
meeting. lf the articles do not provide anything for the quorum, provisions of the Act shall apply. The
articles may provide expressly or by implication that quorum need not be present throughout the
meeting. The articles may also provide special majority being less than quorum for an adjourned
meeting. Section 85(2) of The Companies Act, 1994 authorizes the articles to make provision for
quorum. ln absence of specific provisions in the articles of a company the provisions as mentioned in
section 85(2) of The Companies Act, 1994 shall be applicable:

(a) two or more members holding not less than one-tenth or thetotal share capital paid-up or, if
the company has not a share, capital, not less than five percent in number of the members of
the company may call a meeting.

(b) in the case of a private company whose number of members does not exceed six, two members
and if such number exceeds six, three members, and in the case of any other company, five
members personally present shall be a quorum.

(c) any member elected by the members present at a meeting may be chairman thereof;

(d) in the case of company originally having a share, capital, every member shall have one vote in
respect of each, share or each hundred taka of stock held by him, and in any other case, every
member shall have one vote.

(e) on a poll, votes may be given either personally or by proxy

(f) the instrument appointing a proxy shall be in writing under the hand or the appointer or of his
attorney duly authorized in writing or if the appointer is a corporation or a company, either
under seal or under the hands of an officer or an attorney duly authorized.

Provided that the appointment of proxy shall not be allowed in case of companies formed under section
28 and a proxy may or may not be a member of the company.

Regulation 52 [not compulsory as per sec 17(2)] of schedule 1 of The Companies Act, 1994 provides the
followings with regard to quorum:

Public company: Five members present in person are required to form quorum for general meeting to
pass ordinary resolution or special resolution or extra ordinary resolution.

Private company: Two members present in person are required to form quorum for general meeting to
pass ordinary, special, extra ordinary resolution.
 Corporate Laws and Practices

Waiting time of quorum:

The articles of the company usually provide as to how long from the appointed time the members are
required to wait for the quorum and if no quorum is present within that time, what will happen to the
meeting. ln absence of any such provision in the articles the following will be applicable:

Regulation 53 of schedule 1-: lf within half an hour from the time appointed for the meeting a quorum is
not present, the meeting, if called upon the requisition of members, shall be dissolved; in any other
case, it shall stand adjourned to the same day in the next week at the same time and place, and if at the
adjourned meeting a quorum is not present within half an hour from the time appointed for the
meeting, the members present shall be quorum.

Regulation 54 of schedule L: The Board of Directors shall select one of their members as its Chairman
who shall preside at every general meeting of the Company:

Provided that the Chairman and the managing director shall not be the same person

Regulation 55 of schedule 1: lf at any meeting the Chairman is not present within thirty minutes after
the time appointed for holding the meeting, the members present shall choose someone of their
number to the chairman,

Effect of absence of quorum within waiting time:

lf within 30 minutes of the time appointed for meeting or such other time as may be mentioned in the
articles, the quorum is not present, the meeting shall stand adjourned to the same time, day & place till
next week or as per provisions of the articles. A meeting called upon the requisition of members shall
stand dissolved if quorum is not present within the waiting time.

Quorum of Extraordinary Genera! Meeting:

The quorums required by the provisions of articles of association usually regulate convening an extra
ordinary general meeting. As per section 87(1) three fourths majority of the members entitled to vote
present in person or by proxies are required to pass an extra ordinary resolution. Unless the articles
provide otherwise, quorum as per schedule 1 shall be required to conduct extraordinary general
meeting.

Counting of representative towards quorum:

Section 86 of The Companies Act, l-994: A company which is a member of another company may by
resolution of the directors, authorize any of its official or any other person to act as its representative at
any meeting of that other company, and the person so authorized be entitled to exercise the same
powers on behalf of the company which he represents as if he were an individual shareholder of that
other company.

Quorum must be effective:

Mere personal presence is not enough to form quorum. The quorum must be effective members
qualified to vote. Therefore, a member not qualified to vote shall not be counted for quorum.

56 li),lg*
 Corporate Luws and Practices

Authentication of accounts:

According to Companies Act, the balance sheet, profit and loss account or income & expenditure
account shall be signed on behalf of the board of directors-

(i) ln case of a banking company, by the manager or managing agent, if any and three directors
where the number of directors is more than three or by all the directors, if their number is not
more than three; [Sec 189 (1)]

(ii) ln case of any other company, by its managing agent, manager or secretary, if any and by not
less than two directors of the company and one of whom shall be the managing director where
there is one; (Sec. 189 (1)1.

(iii) When the total number of directors of the company for the time being in Bangladesh is less than
the number of directors whose signatures are required by clause (i) & (ii) above, then by all the
directors in Bangladesh, or if there is only one director in Bangladesh, by such director but in
such a case, a statement by such director or directors explaining the reasons for non-compliance
of provision of sectionl89 (1) shall have to be attached.

(iv) The balance sheet, profit & loss account or income an expenditure account shall be audited. The
auditors' report shall be attached thereto; (Sec. 183(3)1.

Authentication of accounts of banking company as per Banking Companies Act:

According to section 38(2) of Banking Companies Act. 1991, the balance sheet, profit & Ioss account and
financial report shall be signed by:

a) in the case of banking company incorporated in Bangladesh by the managing director or the
chief executive of the company and where there are more than three directors of the company,
by at least three of those directors, or where there are not more than three directors, by all the
directors; and

b) in the case of a banking company incorporated outside Bangladesh, by the manager or agent of
the principal office of the company in Bangladesh and by another officer next in seniority to
the manager or agent.

Board's report. authentication. consequences of default

As per section 184(1) there shall be attached to every balance sheet laid before a company in the
general meeting a report by its Board of directors which shall include:

a) the state of the company's affairs;

b) the a mount , if any, wh ich the Board proposes to ca rry to a ny reserve in such bala nce sheet
c) material changes & commitments, if any, affecting the position of the company which has
occurred between the end of the financial year of the company to which the balance sheet is
related and the date ofthe report.

As per section 184(1) the Board's report and any addendum thereto shall be signed by the chairman if
authorized in that behalf by the Board or by the directors as required to authenticate accounts of the
company.

57 li'ri::''
 Corporute Laws and Practices

Filinq of Annual list of members and summarv

As per section 36(1) every company having share capital shall within eighteen months from its
incorporation & thereafter once at least in every year make a list of all persons who on the day of the
first or only ordinary general meeting in the year are members of the company and of all persons who
have ceased to be members since the date of last return or in case of first return, since the date of
incorporation of the company.

Section 36(2): The following shall be stated in the list namely:

(a) the names, addresses, nationality and occupation of all past and present members;
(b) the number of shares held by each of the existing members at the date of return specifying the
shares transferred since the date of last return or, in the case of first return, since the date of
incorporation, by persons who are still members and by persons who have ceased to be members
respectively and also the dates of registration of such transfer; and

(c) a summary distinguish between shares issued for cash and shares issued as fully or partly paid up
otherwise than in cash and specifying the following:

t. the a mou nt of the sha re capital of the com pa ny, a nd the number of the shares into which it is
divided;

2. the number of shares taken from the commencement of the company up to the date of the
retu rn;

3. the amount called up on each share;

4. the total amount of calls received;

5. the total amount of calls unpaid;

6. the total amount of the sums, if any, paid by way of commission in respect of any share or
debentures, or allowed by way of discount, in respect of any shares or debentures, since the
date of the last return or so much thereof as has not been written of at the date of the return;

7. the total number of shares forfeited;

8. the total amount of shares or stock for which share warrants are outstanding at the date of the
last return;

9. the total amount of share-warrants issued and surrendered respectively since the date of the
last return;

10. the latest date on which the general meeting should have been held and whether it was actually
so held;

11". the number of shares or amount of stock compromised in each share warrant;
L2. thenamesandaddressof thepersonwhoatthedateof returnarethedirectorsof thecompany
and of the persons, if any, who at the said date are the managers managing agents or auditors
of the company, and the changes in the personnel of the directors, manager managing agents
since the last return together with the dates on which the tool place; and

L3. the total amount of debt due from the company in respect of all mortgage and charges which
are required to be registered with the Register under this Act.

58 ll]*g*
 Corporate Laws and Practices

As per section 36(3): the list & summary under section 36 shall

L. be contained in a separate part of the register of members and shall be completed within 2i-
days from the date of first or ordinary general meeting in that year;

2. have to be filed with the Registrar;

3. to be signed by the Managing Director and one director or if there is no managing director, by a
director and managing agent or manager or secretary;

4. A private limited company shall have to submit a certificate stating that it has not issued any
invitation to the public to subscribe for any shares or debentures.

The return in the form set out in Schedule X of the Act cannot filed without holding the general meeting.

Dividends and Reserve

Regulation 96 of Schedule-l: The company in general meeting may declare dividends, but no
dividends shall exceed the amount recommended by the directors. Dividend shall be paid within two
months from the date of its declaration.

Provided that the period of two months shall not apply in case where

a) There is a dispute regarding the right to receive the payment; or

b) The dividend has been lawfully adjusted by the company against any sum due to it from the
shareholder.

However, clause 28 of Dhaka Stock Exchange (Listing) Regulations ,20'J,5 states the followings

[a) The issuer of listed securities shall, within 30 (thirty) days of declaration or approval, as the
case may be, based on the written option collected from the securities holder concerned,
pay off the dividend,

tb) through transfer of cash dividend to the bank of the securities holder for depositing into
the securities holder's account:

Provided that, the securities holder will bear the applicable service charge, if any, of the
securities holder's banker, and also that the issuer shall simultaneously issue
a letter of intimation
to the securities holder containing, among others, the amount of tax deducted at source, if any,
the date and amount remitted with details of the bank through and to which bank such remittance
has been effected; or through issuance of cash dividend warrant in the name and address of the
securities holder concerned as provided in the beneficial owner's (BO) account set up in case of
dematerialized securities, or as provided by the securities holder in case of paper securities;

[c) through transfer of stock dividend into the beneficial owner's (BO) account of the
shareholder in case of dematerialized share, or through issuance and delivery of the share
certificate to the shareholder in case of paper share.

59 lPlg*
 Corporate Luws and Practices

(2) An issuer of listed securities, which makes a default in complying with the provision
of sub-regulation (1), respective director/ officer shall be jointly and severally liable
to pay to the Exchange a penalty of Taka 5,000.00 (five thousand) only for every day
during the default continues:
Provided that the Exchange shall notify the fact of such default and the name of defaulting issuer
by notice or through online news of the Exchange:

Provided further that any action under this sub regulation (2) shall be without prejudice to the action
or steps taken by any other person or authority.

Regulation 97 & 98 of Schedule-l: The directors may from time to time pay to the members such
interim dividends as appear to the directors to be justified by the profits of the company. No
dividends shall be paid otherwise than out of profits [of the year or any other undistributed profits,

Regulation 99 of Schedule-l: Subject to the rights of persons (if any) entitled to shares with special
rights as to dividends, all dividends shall be declared and paid according to the amounts paid on the
shares, but if and so long as nothing is paid upon any of the shares in the company, dividends may be
declared and paid according to the amounts of the shares. No amount paid on a share in advance of
calls shall, while carrying interest, be treated for the purposes of this article as paid on the share.

Regulation 100 of Schedule-l: The directors may, before recommending any dividend, set aside out
of the profits of the company such sums as they think proper as a reserve or reserves which shall, at
the discretion of the directors, be applicable for meeting contingencies, or for equalizing dividends,
or for any other purpose to which the profits of the company may be properly applied, and pending
such application may, at the like discretion either be employed in the business of the company or be
invested in such investments (other than shares of the company) as the directors may from time to
time think fit.

Regulation 101 of Schedule-l: lf several persons are registered as joint-holders of any share, any one
of them may give effectual receipts for any dividend payable on the share. Notice of any dividend
that may have been declared shall be given in manner hereinafter mentioned to the persons entitled
to share therein. No dividend shall bear interest against the company.

QUESTTONS FOR DISCUSSION

Question The following issues have been brought to your attention. You are requested to give
opinion with reference to the provisions of The Companies Act, 1994:

a) ABC Limited, a public limited company listed with the Stock Exchanges of
Bangladesh. The company follows financial year from July to June each year. The
3'd AGM of the company was held on December 15, 2017. What will be the
deadline for holding the 4th AGM of the company?

b) XYZ lnsurance Company Limited is listedwith the Stock Exchanges of Bangladesh.

The Company follows financial year as defined in section 2(i) of The Companies
Act, 1994. The 6th AGM of the Company was held on July 20,2017. What will be
the deadline for holding the 7th AGM of XYZ lnsurance Company Limited
assuming that the company:

60 ll];tgr
 Corporate Laws and Practices

does not have any business or interest outside Bangladesh?

has business or interest outside Bangladesh?

Answer a) Considering the provisions of section 81 and 183 together, it can be said that
since July-June is the financial year of ABC Company Limited and the 3'd AGM was
held on December 15, the 4'h AGM may be held not, beyond December 3!,20L8
to remain within one AGM in each calendar year.

bXi) As per provision of section 2(i) of The Companies Act, 1994 financial year of an
insurance company shall mean the calendar year. Therefore, financial year of
XYZ lnsurance Company Limited is January to December. Hence, the 7th AGM of
the Company is to be held within September 30, 2018. i.e. within nine months
from the date of ending of the financial year [section 183(2Xi)].

bXii) lf the company has business or interest outside Bangladesh the 7th AGM of the
company may be held within December 31,,201,8 [section 183(2Xii)].

Question The AGM of XYZ Company Limited was called at the factory premises situated at about
350 km away from its registered office. On the day of the meeting the conveners i.e.
the Chairman, the Directors & the Company Secretary could not be present in the
meeting place due to reasons not within their control. The shareholders who
assembled at the factory premises found that the conveners of the meeting were
absent & the meeting place was under lock & key. The shareholders present convened
the meeting in a nearby building. They ascertained that quorum was present,
appointed one of them as the chairman for that meeting since the Chairman and the
Directors were not present within the waiting time as per articles of association and
conducted the meeting as per agenda. Everything was done according to articles to
ensure a valid meeting. They took all resolution as per agenda of the meeting except
that they approved a higher rate of dividend than the rate recommended by the
board. Please answer the followings with reference to the relevant provisions of
Companies Act 1994.

a. ls the AGM conducted by the shareholders valid?

b. Are the resolutions taken in the AGM binding on the Company?

c. lf the chairman claims that he has postponed the meeting on the basis of a board
decision made on way to the meeting place where they were bound to halt, what
will be legal status of his claim, if he wants to hold the AGM on another date?

d. What else the company should do if it does not want to give cognizance to the said
general meeting?

Answer a. A meeting would be valid if proper notice has been given, quorum was present and
chairman of the meeting was appointed as per articles. The presence of
Chairman irectors/Com Secreta in the general meetin is not mandato

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Even a retiring director who may be re-elected, his presence is also not needed.
Question arises whether a meeting can be held at a place other than place of the
meeting mentioned in the notice. lt was established that meeting place may be
changed by the members assembled for the meeting. Therefore, it seems that the
meeting was valid.

b. With regard to validity of the resolutions, it can be said that approval of dividend at
a rate more than the rate recommended by the board is invalid although it is
approved by all the shareholders. The board of directors at its discretion may
recommend dividend at a particular rate. The general meeting may approve the
declaration of dividend at recommended by the board or any other lower rate or
disapprove the declaration. The general meeting cannot increase the rate of
dividend. Therefore, this resolution cannot bind the company though the meeting
might be validly convened. However, other resolutions are binding on the
Company.

c. With regard to holding the AGM on different date in view of the Chairman's claim
that the AGM was postponed & giving no cognizance to the AGM held without
conveners, it is essential to prove that the meeting was validly postponed. A
properly convened meeting cannot be postponed for personal reason of anybody.
The members present are entitled to ignore the notice of postponement. lf there is
a quorum, they may hold the meeting as originally convened & validly transact the
business. ln fact, in the above situation no formal and valid notice was served to
postpone the AGM.

d. With regard to other option available, the Directors may claim that the AGM was
not conducted properly & take shelter of the Court to declare the meeting invalid &
seek for direction to convene a general meeting under section 85 (3) at future date.

Question 'A' is a friend of B, C & D who are directors of XYZ Company Limited. B, C, D decided to
take 'A' as a shareholder as well as a director with the object to utilize his expertise. B,
C, D in their board meeting allotted sharesto'A'and co-opted him as director, issued
share certificates, filed Return of Allotment, Particulars of Directors & Consent Form.
Accordingly, name of 'A' was also shown in the annual list of members. After some
years B, C & D decided to get rid of 'A' because 'A' has now became burden for the
company & he ('A') has been acting contrary to the decisions of B, C and D. Please
answer the followings in line with provisions of Companies Act, 1994:

a. Can 'A' be removed from the directorship by B, C and D?

b. Can 'A' be removed from the membership who in fact did not pay any money
against the shares issued to him?
c. ls there any other remedy in company law to get rid of 'A' as desired by B, C & D?

Answer a lf & D and any other shareholders who want to remove 'A' have over 75%
B, C
voting right together (i.e. 75% of the paid up capital), then they can remove 'A' by
special resolution p assed at an extraordinary general meeting to be convened by

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giving 21. days' notice. According to section 106(1) & regulation g7 of schedule L,
a director may be removed by passing special resolution before expiration of his
term of office and appoint another person in his/her place by an ordinary
resolution.

b. with regard to removal of 'A' from membership it may be said that when share
certificate is issued, the name of the person appears in the share register and
annual list of members; the company has two bindings. The first one is relating to
title when share certificate is issued; it is declaration by the company to all that
the person in whose name the certificate is issued is a shareholder of the
company. ln others words, the company is estopped from denying his title to the
share. The second binding is estoppel as to payment. lf the certificate states that
on each of the shares, full amount has been paid, the company is stopped from
alleging that no payment was made. It has been established that where share
certificates were issued as fully paid shares though nothing was paid on those
shares, neither the company nor the liquidator can deny that shares were fully
paid & therefore the name of the shareholder cannot be removed from the
membership of the Company.

c. with regard to any other remedy it may be said that the company or the board,
while exercising their powers bona fide, such remedy may happen to come in case
of alteration of share qualifications, issue of right shares etc. which might cause
loss of directorship, reduction in the percentage of shares, if future amount is not
invested by'A'.

Question The sha res of a Private Limited company are held by the shareholders as follows

Mr. A 45%
Mr. B 35%
Mr. C 20%

The Company offered Right Shares at l":1. Mr. C did not exercise the right offer. Mr. B
wants to subscribe the shares not taken by c. can the Board comprising of A, B, and c
allot the unsubscribed shares to Mr. B, if Mr. A opposes the same?

Answer Th e Directors cannot allot shares in a manner by which the exiting percentage of
shareholding is changed. lf Mr. C regrets to accept the right offer the unsubscribed
portion must be offered to the remaining shareholders in proportion to their current
holding. Since Mr. A opposes to allot the unsubscribed shares only to Mr. B the
allotment will not be valid. Mr. B can accept the entire unsubscribed portion of
shares if Mr. A also refuses to ac cept the same

Question The annual general meeting of a publicly traded company was called at a Iocal hotel.
The time fixed for the meeting was 10:00 a.m. The meeting was called as per
provisions of the companies Act, 1994. At the scheduled time of the AGM the
Chairman entered into the meeting room and found that 75 shareholders were
sittin there. As per record date data the com n had 5,590 shareholders. The

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Chairman asked the Company Secretary whether the quorum was present. The
Company Secretary confirmed that the quorum was present (as per articles of
association of the company presence of 50 shareholders fulfills the quorum). The
Chairman started the meeting and proceeded as per agenda. The meeting was over
within 15 minutes. When the Chairman and other shareholders were leaving the
meeting place about 250 shareholders entered into the meeting room. They
collectively held a significant portion of shares of the company and claimed that the
Chairman should have wait for 30 minutes to start the meeting. Was the meeting
valid without them? Give proper j ustification in favor of your answer

Answer A meeting will be valid when quorum is present, notice is valid & legal formalities are
fulfilled. There is no legal provision to delay the starting of business at a meeting if
the Chairman and quorum are present. The 30 minutes waiting time is allowed only
when quorum is not present (Regulation 53 of The Companies Act, 1994). According
to Regulation 55 starting of business may also be delayed by 30 minutes if the
Chairman is not present. lf the Chairman is not present within 30 minute of
appointed time of the meeting, the members present may elect a Chairman among
themselves for the meeting. Therefore, demand of the 250 shareholders regarding
waiting for 30 minutes to start the meeting is not valid and the proceedings of the
meeting will be valid.

Question 75 shareholders (holdingL5% shares of the Company)out of 650 shareholders of XYZ

Company Limited submitted a requisition on January L5,201.8 for holding of an Extra-
Ordinary General Meeting in order to remove the Managing Director on some valid
grounds. On failure of the Company to call the General Meeting, the requisitionists
themselves called the meeting on April 30, 2018 at the registered office of the
Company. On the date of the meeting they found that the registered office was kept
under lock and key although it was a working day. The shareholders held the
meeting in a nearby place and adopted a resolution removing the Managing Director.
ls the resolution taken in the meeting valid? Give arguments in support of your
answer.

Answer Notwithstanding anything contained in the articles, the directors of a company which
has a share capital shall, on the requisition of the holders of not less than one tenth
of the issued share capital of the company upon which all calls have been paid,
forthwith proceed to call an extraordinary general meeting of the company.
The requisition must state the objects of the meeting and must be signed by the
requisitionists and deposited at the registered office of the company, and may
consist of several relevant documents, each signed by one or more requisitionists.

lf the directors do not, within twenty-one days from the date of deposit of the
requisition proceed duly to call a meeting on a day not later than forty-five days from
the date of the deposit of the requisition, then the requisitionists, or a majority of
them in value, may themselves call the meeting, but any meeting so called shall be
held within three months from the date of the deposit of the requisition.

The requisitionists may hold the meeting at any suitable place if the registered office
is not made available for them. Since the meeting has been held after three months

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from the date of the requisition the resolution taken in the meeting is not valid

Question The Board of Directors of XYZ Company Limited, a company listed with both the Stock
Exchanges of Bangladesh, has planned to hold its meeting on iune 30, 2015. Agenda
of the meeting (among others) is to recommend dividend for the year ended
December 3'J., 201.4. The Board also planned to take the following decisions in this
regard:

a) To fix record date on July 9, 2015 which is a public holiday;

b) To fix date of the Annual General Meeting on October 1,5,2015.

It is to mention that last Annual General Meeting of the company was held on June
1,5,201'4. You are requested to give your opinion regarding the above decisions to be
taken by the directors of XYZ Company Limited and give your recommendations, if
any. Assume that you were communicated to give your opinion on March 31, 2015.

Answer Regarding the above planning of the Board of Directors of XYZ Company Limited
some non-compliances are noted. My advices in this regard are as follows:

i) As per Listing Regulations of Dhaka Stock Exchange Limited record date for
corporate entitlement will be at least 7 (seven) market davs after the date of
declaration of dividend and/or holding of general meeting, if the concerned
company falls under other than z category company. lf the company is a Z
category company, the record date will be at least 14 (fourteen) market davs
after the date of declaration of dividend and/or holding of general meeting.
Assuming that XYZ Company Limited falls under other than Z category company
the planned record date must be fixed in any day after seven market days and
the record date also must be a market day. ln this regard other provisions of the
law must be kept in mind.

ii) As per BSEC notification the Annual General Meeting of the company shall be
held fulfilling the following conditions:
o Within 45 working days from the date of the record date;
o Within six months from the date of closing of the accounting year; and
o Within 15 months from the date of the last AGM
Therefore, date of the AGM must be fixed considering all the relevant regulations.
Hence, the AGM shall be held within June 30, 2015.

Question The Directors of a

company convened a Board meeting before AGM and
recommended cash dividend @ 20% & carried other business as is usually done in
such board meeting before AGM. The proposed dividend was notified to the Stock
Exchanges accordingly. But the AGM was called and adjourned for indefinite period.

i) lsthe recommended dividend payable?

ii) lsthere a default by the company with regard to the provisions of The Companies
Act, 1994?

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 Corporate Laws and Practices

Answer According to section 18a(1Xc) the board may recommend final dividend through its
report to the members. The dividend becomes payable after the members approve it
in the General Meeting. According to regulation 96 of Schedule I of The Companies
Act, 1994 dividend shall have to be paid within two months (as per BSEC circular
within one month) shall not apply in case where:

i) there is a dispute regarding right to receive paymenU or

ii) the dividend has been lawfully adjusted by the company against any some due
from any shareholder.
This regulation is not compulsory according to sec 17(2) of the Companies Act.
Therefore, if the company's articles do not include this regulation relating to time for
paymenq even if provision for the proposed dividend is made in the accounts, yet it
will not become a liability of the company because the same has not been approved
by the shareholders in the General Meeting.

The Chairman may, with the consent of the meeting adjourn the meeting. A valid
adjournment cannot go beyond the date whichever date falls earlier determined in
the following way:

(a) Last day of the calendar year or

(b) Last day of 15 months from the date of previous AGM or
(c) Last day of nine months (in case of company having interest outside
Bangladesh 12 months) from the date of close of accounts. As per BSEC circular
the duration is six months.

lf there is no objection of adjournment, shareholders have to wait till the date which
falls earlier determined in above way. lf the adjourned meeting is not convened
within the date, shareholders may give requisition for EGM.

ln order make dividend a liability to the company, two or more members holding not
less than one tenth of the paid up capital may submit a requisition under section 84
to hold EGM to approve the dividend or they may apply to the court under section
83(3) to hold the annual general meeting, if they think that adjournment was not
valid.

Question The following issues have been brought into your attention for your opinion. You are
requested to give your expert opinion in accordance with the provisions of The
Companies Act, 1994:

a) ABC Company Limited circulated the notice of the Annual General Meeting
dated March L, 2018. Actually the notice was circulated on March 3, 20L8
mentioning that the AGM will be held on March L2,20t8. The company has 250
shareholders. On the date of the meeting two shareholders having their voting
right raised the issue that the meeting was not convened complying with the
provisions of The Companies Act, 1994.

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 Corporate Laws and Practices

b) Max Company Limited circulated the notice of the Extraordinary General

Meeting dated April 15, 2018 mentioning that the EGM will be held on May 3,
2Ot8 f or passing some special resolutions. The agenda and proposed resolutions
were circulated along with the notice. The company has 150 shareholders. On
the date of the meeting ten shareholders having 4% of the voting right in the
company raised the issue that the meeting was not convened complying with
the provisions of The Companies Act, 1994.

c) The Annual General Meeting of Alfa Company Limited (a public limited

company) was held on was held on May 31, 2018 complying with the relevant
rules and regulations. Out of 45 shareholders 24 shareholders were present in
the AGM. The meeting was conducted as per agenda. when the agenda on
retirement and re-election of directors was placed for discussion around 4
shareholders (holding 9.85% of the issued capital) requested the Chairman to
elect one them namely Muzahid chowdhury as a director of the company. The
Chairman refused the proposal. Then those shareholders demanded poll for
electing Mr. Muzahid Chowdhury as a director of the company. The Chairman
did not take the demand for poll into his cognizance. The aggrieved
shareholders challenged the proceedings of the meeting.

Answer a) As per provisions of section 85(1) of The companies Act, 1994 notwithstanding
anything contained in the articles of association of a company 14 days, notice
shall be given for calling an annual general meeting. However, AGM may be
called giving shorter notice if all the members entitled to attend and vote
thereto agree in writing to hold the AGM with shorter period of notice. ln the
stated situation since two shareholders have raised objection holding of the
AGM will not be valid.

b) As per provisions of section 85(1) of The Companies Act, 1994 notwithstanding

anything contained in the articles of association of a company 2! days' notice
shall be given for calling a general meeting. However, general meeting/EGM may
be called giving shorter notice if the members holding at least 95% paid up
shares of the company entitled to attend and vote thereto agree in writing to
hold the EGM with shorter period of notice. ln the stated situation since
shareholders holding 96% paid up shares of the company agreed (assuming that
in writing)to hold the EGM; there is no legal issue to hold the meeting.

c) As per provisions of section 85(1Xc) of The companies Act, 1994 five members
present in person or by proxy or the chairman of the meeting or any member or
members holding not less than one-tenth of the issued capital which carries
voting rights shall be entitled to demand a poll. ln the stated situation the
demand of 4 shareholders holdin g9.85% of the issued capital of the company is
not valid. Hence, all the proceedings of the AGM will be valid and there is no
obligation to appoint Mr. Muzahid chowdhury as a director of the company.

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 Corporate Lsfi's and Practices

Maintenance of Books of Account and Audit

1. The directors shall cause to be kept proper books of account with respect to -

(a) all sums of money received and expended by the company and the matters in respect of
which the receipts and expenditure take place,
(b) all sales and purchases of goods by the company,
(c) the assets and liabilities of the company,
(d) cost accounts, where applicable.

2 The books of account shall be kept at the registered office of the company or at such other place
as the directors shall think fit and shall be open to inspection by the directors during business
hours.

3. The directors shall from time to time determine whether and to what extent and at what times
and places and under what conditions or regulations the accounts and books of the company or
any of them shall be open to the inspection of members not being directors, and no member (not
being a director) shall have any right of inspecting any account or book or document of the
company except as conferred by law or authorized by the directors or by the company in general
meeting.

4 The directors shall, as required by Sections L83 and 184 of the Companies Act 1994, cause to be
prepared and to be laid before the company in general meeting such profit and loss accounts,
(income and expenditure accounts) balance-sheets, and reports as are referred to in those
sections.

5 The profit and loss account shall (in addition to the matters referred to in sub-section (2) of Section
185 of the Companies Act, 1994,) show, arranged underthe most convenient heads, the amount of
gross income, (diminished in the case of a banking company by the amount of any provision made to
the satisfaction of the auditors for bad and doubtful debts) distinguishing the several sources from
which it has been derived, and the amount of gross expenditure distinguishing the expenses of the
establishment, salaries and other like matters. Every item expenditure fairly chargeable against the
year's income shall be brought into account so that a just balance of profit and loss may be laid
before the meeting and, in cases where any item of expenditure which may in fairness be distributed
over several years has been incurred in any one year, the whole amount of such item shall be stated,
with the addition of the reasons why only a portion of such expenditure is charged against the
income of the year.

6 A balance-sheet shall be made out in every year and laid before the company in general meeting
made up to a date not more than six months before such meeting. The balance-sheet shall be
accompanied by a report of the directors as to the company's affairs, and the amount which they
recommend to be paid by way of dividend, and the amount (if any) which they propose to carry to
a reserve fund,

7 A copy of the balance-sheet and report shall, fourteen days previously to the meeting, be sent to
the persons entitled to receive notice of general meetings in the manner in which notices are to
be given hereunder.

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 Corporate Laws snd Practices

8. The directors shall in all respects comply with the provision of Sections 181 to 191 of the
Companies Act,1994, or any statutory modification thereof for the time being in force.

Audit

9 Auditors shall be appointed and their duties regulated in accordance with Sections 2L2 and 213 of
the Companies Act, 1994 or any statutory modification thereof for the time being in force.

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 Corporate Laws and Pructices

DIRECTORS

1. MEANTNG AND NUMBER OF DIRECTORS

Directors are persons elected by the shareholders from among themselves for the purpose of managing
the business of the company. ln a public company, there is a separation of ownership from control' To
protect the interest of the company and of the shareholders, there must be directors' Section 90 (1)
states that every public company and a private company which is a subsidiary of a public company shall
have at least three directors. Every private company other than a private company mentioned in sub-
section (1) shall have at least two directors.

2. APPOINTMENT OF DIRECTORS

There are certain mandatory provisions which must be observed while appointing directors in the case
of public limited companies. For private companies, it is usual that the articles provide the mode of
appointment of the directors. But they have to look for the provisions applicable both for the public as
well as private companies. The provisions for appointment of directors in public limited companies are:
L. Every company shall have at least three directors [(sec. 90(1)].

2. Only natural persons can be appointed directors [sec.90 (3)].

3. The directors shall be appointed by the members in general meeting [91(1) O].
4. Causal vacancy may, however, be filled up by the directors t91(1) Ol.

5. The duration of office of a director shall be liable to determination at any time by retirement in
rotation 191(2)1.

6. A consent in writing by persons to act as directors must be filed with the registrar [92(1) (a)].

7. A consent of directors to take qualification shares must be filed with the registrar or sign the
memorandum of association by taking qualification shares t92(1Xb)l'
8. A signed consent to act as director should accompany the proposal for directorship to the
company (93).
9. A director away from Bangladesh for a consecutive period of at least three months may appoint
his alternate director if so authorized by the article or by a resolution of the general meeting ?(sec'
101).

3. RESTRICTIONS ON APPOINTMENT

Section 92 of the Companies Act lays down that a person shall not be capable of being appointed
director of a company by the articles and shall not be named as a director or proposed director of a
company or in relation to any intent company in any prospectus issued by the company or in any
statement in lieu of prospectus filed by or on behalf of a company unless before the registration of the
articles of the publication of the prospectus or the filing of the statement in lieu of prospectus, as the
case may be, he has by himself or by his agent authorized in writing:

a. Signed and filed with the registrar to consent in writing to act as such director ; and

b. ln the case of companies having a share capital either signed the memorandum for a number of
shares not less than his qualification shares ; or taken from the company and paid or agreed to
pay for his qualification shares; or signed and filed with the registrar a contract in writing to take

70li:)*g*
 Corporate Laws and Pructices

from the company and pay for his qualification shares ; or made and filed with the registrar and
affidavit to the effect that a number of shares not less than his qualifications shares are registered
in his name.

On the application for registration of the memorandum and articles if any, of a company, the applicant
shallfile with the registrar a list of the persons who have consented to be directors of the company, and,
if this list contains the name of any person who has not so consented, the applicant shall be liable to a
fine not exceeding two thousand taka.

The above provisions shall not apply to the appointment of the chief executive, by whatever name
called, of any insurance company or a banking company as a director of that company if the articles;
thereof provides for such appointment.

4. qUALIFICATION SHARES

The articles of a company usually fix a minimum number of shares which every director must subscribe
in order to become a director. This minimum number is known as the qualification shares. lt is the duty
of every director who is required by the articles to hold a specified share qualification and who has not
already qualified himself accordingly, to obtain his qualification within two months after his
appointment or such shorter time as may be fixed by the articles [sec 97(1)]. lf, after the expiration of
the period mentioned in sub-section (1) any such unqualified person acts as a director of the company,
he shall be liable to a fine not exceeding two hundred taka for every day between the expiration of the
said period and the last day on which it is proved that he acted as a director (both days inclusive)
[sec.
s7 (2ll

5. DTSqUALIFtCAT|ONS OF DIRECTORS

According to section 94, a person shall not be capable of being appointed as director of a company, if-
(a) he has been found to be of unsound mind by a competent court and the finding is in force; or
(b) he is an undercharged insolvent ; or
(c) he has applied to be adjudicated as an insolvent and his application is pending; or
(d) he has not paid any call in respect of shares of the company held by him, whether alone or jointly
with others, and six months have elapsed from the last dayfixed forthe payment of the call; or
(e) he is a minor.

A company may in its articles provide additional grounds for disqualification of a director

6. VACATION OF OFFICE OF DIRECTOR

Under section 108 of the Companies Act, the office of a director shall become vacant under the
fol lowing ci rcumstances:

f if he fails to obtain within the due time or at any time thereafter ceases to hold, the qualifications
shares, if any, necessary for his appointmen| or
2. if he is found to be of unsound mind by a competent court; or
3. if he is adjudged an insolvent; or

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 Corporate Luws and Practices

4 if he fails to pay calls made on him in respect of shares held by him within six months from the
date of such calls being made; or
5 if he or any firm of which he is a partner or any private company of which he is a director, without
the sanction of the company in general meeting accepts or holds any office of profit under the
company other than that of a managing director or manager or a legal or technical adviser or a
banker; or
6. if he absents himself from three consecutive meeting of the directors or from all meetings of the
directors for a continuous period of three months, whichever is the longer, without leave of
absent from the Board of Directors; or
7 if he or any firm of which he is a partner or any private company of which he is a director accepts a

loan or guarantee from the company in contravention of section 103; or

8 if he acts in contravention of section 105.

7. LOAN OF DIRECTOR

Section 103 (1) states that no company, other than a lending company mentioned below shall make any
loan or give any guarantee or provide any security in connection with a loan made by a third party to-
(a) Any director of the leading company.
(b) Any firm in which any director of the lending company is a partner.
(c) Any private company of which any director of the lending company is a director or member.
(d) Any public company, the managing agent, manager or director where of is accustomed to act in
accordance with the directions or instructions of any director of the lending company.

Provisions of this section shall not apply to the making of a loan or giving of any guarantee or providing any
security by a lending company if such company is a banking company or a private company not being a
subsidiary of a public company, or if such company as a holding company makes the loan or gives the
guarantee or provide the security to its subsidiary ; and the loan is sanctioned by the Board of Directors of
any company and approved by the general meeting and, in the balance sheet, there is a specific mention
of the loan, guarantee or security, as the case may be [sec.103 (2)]. However, in no case the total amount
of the loan shall exceed 50%of the paid up value of the shares held by such director if his own name. ln
the event of any contravention of sub-section (1), every person who is a party to such contravention
including in particular any person to whom a loan is made or on whose behalf a guarantee is given to or
security provided, shall be punishable with the fine which extend to five thousand taka or simple
imprisonment for six months in lieu of fine and shall be liable jointly and severally to the lending company
for the repayment of such loan or for making good any sum which the lending company may be called up
to pay under the guarantee given or security provided by the lending company. The provisions of this
section shall apply to any transaction represented by a book debt which was from its inception in the
nature of a loan or an advance.

8. DIRECTOR NOT TO HOID OFFICE OF PROFIT

No director or firm of which such director is a partner of private company of which such director is a
Director shall, without the consent of the company in general meeting, hold any office of profit under
the company except that of a managing director or manager or a legal or technical adviser or a banker
(Section-104).

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 Corporate Lsws and Practices

9. REMOVAL OF DIRECTORS

A company may remove any shareholder director before the expiration of his period of office by
extraordinary resolution and may by ordinary resolution appoint another person in his stead and the
person so appointed shall be subject to retirement at the same time as if he had become a director on
the day on which the director in whose place he is appointed was last elected director. A director so
removed shall not be re-appointed a director by the Board of Directors (Section - 106).

10. RESTRICTIONS ON POWER OF DIRECTORS

The directors of a company or of a subsidiary company of a public company shall not, except with the
consent of the company concerned in general meeting sell or dispose of the undertaking of the
company; and Remit any debt due by a director (Section-107)

11. APPOINTMENT OF MANAGING DIRECTOR

Section 110 states that-

1,. A company shall not appoint or employ any individual as its managing director for a term
exceeding five years at a time.
2. Any individual holding, at the commencement of this Act, the office of the managing director in a
company shall, unless his term expires earlier, be deemed to have vacated his office immediately,
on the expiry of five years from the commencement of this Act.
3. Nothing contained in sub-section (1) shall be deemed to prohibit the re-employment or the extension
of the term of office of any person as managing director for a further period not exceeding five years
on each occasion. However, no such re-appointment, re-employment or extension of term of office
shall be made without the consent of the company in general meeting.

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 Corporate Laws und Practices

Liquidation

Section overview

out by a liquidator.

solvent) or as a creditors' voluntary winding up.

particular order, including distributing any surplus to contributories once creditors have
been satisfied.

t. Members' voluntary winding up

Subject to the requirement for a declaration of solvency (see below), the members may resolve to wind
up the company

the happening of a specified event (this is rare)

The winding up is deemed to commence when the resolution is passed and notice must be given in the
Gazette within 14 days.

A voluntary winding up is a members' voluntary winding up only if the directors make and deliver to the
registrar a declaration of solvency (s 89 lA '86).

This is a statutory declaration that the directors have made full enquiry into the affairs of the company
and are of the opinion that it will be able to pay its debts in full, together with interest (at the applicable
rate), within a specified period not exceeding L2 months. lt is a criminal offence punishable by fine or
imprisonment for a director to make a declaration of solvency without having reasonable grounds for it.

The declaration must

the declaration is made.

The declaration must be:

The company may appoint a liquidator by passing an ordinary resolution to that effect. lf the liquidator
later concludes that the company will be unable to pay its debts, he must call a meeting of creditors and

74 li}ag*
 Corporate Laws and Practtces

lay before them a statement of assets and liabilities (s 95 tA 'g6).

ln a members' voluntary winding up the creditors play no part, since the assumption is that their
debts
will be paid in full. However, a members' voluntary liquidation may become a creditors' voluntary
liquidation where the liquidation process is not progressing to the satisfaction of the company's
cred itors.

2. Creditors'voluntaryliquidation

Where a company intends to wind up voluntarily (and passes an ordinary or special resolution to that
effect as the case may be) but the directors are unable to make a declaration of solvency, the liquidation
proceeds as a creditors' voluntary winding up, even if in the end the company pays
its debts in full (s 96
lA '86). Despite its label, this type of liquidation is not initiated by the creditors.

The company must convene a meeting of creditors within 14 days of the proposed members'
resolution
to wind up the company, giving at least seven days' written notice of this meeting. The notice must be
advertised in the Gazette and two local newspapers. The notice must either

before the meeting for information about the company, or

one of the directors presides at the creditors' meeting and lays before it a full statement
of the
company's affairs and a list of creditors with the amounts owing to them. The
members and the
creditors are entitled to nominate a liquidator. lf the creditors nominate a different person
to be
liquidator, their choice prevails over the nomination by the members. lf they do
not appoint one, it will
be the members' nominee who will take office. The creditors may also appoint
a liquidation committee
to act with the liquidator.

It may be the case that the members' nominee takes office as liquidator pending the
creditors' meeting.
During this period the powers of the members' nominee as liquidator are restricted
to

immediately, and

This prevents an obliging liquidator selling assets to a new company formed

by the members of the
insolvent company, in order to defeat the claims of the creditors at minimum
cost and enable the same
people to continue in business untilthe next insolvency supervenes.
such a transaction is referred to as
'centrebinding' following Re Centrebind Ltd 1966.

Re Centrebind Ltd i.966

The focts: The directors convened a general meeting, without making

a statutory declaration of
solvency, but failed to call a creditors' meeting for the same or the next
day, for which they were liable
to pay a small fine. The liquidator chosen by the members had disposed of the assets before the
creditors could appoint a liquidator. The creditors' liquidator challenged the
sale of the assets (at a low
price) as invalid.

75 1i"*r*
 Corporate Laws and Practices

Decision: The first liquidator had been in office when he made the sale and so it was a valid exercise of
the normal power of sale.

lf the members' liquidator wishes to perform any other act, he will have to apply to the court
for leave'

3. Compulsory liquidation

A company may be obliged to wind up by the court on the petition of, usually, a creditor
or member' lt
process than a voluntary
tends to be a less strailhtforward and more time-consuming and expensive
most of these are
winding-up. Around 90% of all compulsory liquidations follow a creditor's petition and
on the grounds of the company's insolvency'

grounds {s 1221A '86),

A petition may be brought for a compulsory winding up on one of seven statutory
the most significant of which are:

Ground Explanation

That the company is A creditor must (in petitioning on the grounds that the company is
unable to pay its debts unable to pay its debts) show either
(s 122 (iXf) That he is owed more than f750 and has served on the company at its
registered office a written demand for payment and the company has
neglected, either to pay the debt or to offer reasonable security for it
within 21 days, or
That he has attempted to enforce a judgment against the company by
execution on the company's property but it has failed to satisfy the
debt, or
That, taking into account the contingent and prospective liabilities of
the company, it is unable to pay its debts as they fall due or that its
assets are less than its liabilities.

That it is just and This ground is usually relied on by a member who is dissati sfied with
equitable to wind up the directors or controlling shareholders over the management of the
the company company (for example, where there is management deadlock or where
relations within a quasi-partnership break down). lt must be shown that
no other remedY is available.

(This rovision was discussed in Chapter 6

A member's petition to wind up the company on the grounds that it is just and equitable to do so,
will
been
only be considered if the company is solvent (otherwise he has nothing to gain from it) and he has
a registered shareholder for at least six of the last 18 months prior to the petition (subject to some
exceptions).

The DTI may petition for the compulsory winding up of a company

company to be wound uP.

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 Corporate Laws and Practices

On a compulsory winding up, the court will usually appoint the Official Receiver (an officer of the court)
as liquidator, although he may be replaced by an insolvency practitioner at a later date. The Official
Receiver must investigate (s 132)the causes of the failure of the company, and generally, its promotion,
formation, business dealings and affairs.
The liquidation is deemed to have commenced at the time (possibly several months earlier) when the
petition was first presented, with the following consequences:

commencement of liquidation is void unless the court orders otherwise.

unless the court gives leave.

powers of management previously held by the directors.

control, unless the court orders the assets to be vested in the liquidator.

only to realization, for instance by sale as a going concern.

Worked example: Petition for compulsory liquidation

A has sold goods worth f29,567 to B on credit. B Ltd has exceeded the credit terms extended and A has
presented B Ltd with a written demand to their registered office, which B Ltd has not responded to
after
a month. B Ltd have sold on the goods which they purchased from A and do not dispute the value of the
invoice.
What action can A take?

A can petition the court for the compulsory winding up of the company because the company has failed
to satisfy its demand for a debt of over f75O within 21 days, He will petition on the ground that the
company is unable to pay its debts.

lnteractive question 1: lnsolvency [Difficulty level: Exam standard]

Zorro Ltd incorporated 15 years ago and is in the business of supplying pet foods and products to small
retailers. After 13 successful years it borrowed fL50,OO0 to expand its premises and the loan was
secured by a fixed charge on those premises. Due to a nearby out-of town retail park completed 1g
months ago,Zorro Ltd has suffered a significant downturn in its business. One of its regular suppliers of
Bunny Mix, who often extended credit terms over short periods and who was also suffering due to the
new retail park, has recently tried to recover a debt of f1.,725 against the company but he has received
no reply to his latest written demand 25 days ago. He is seriously concerned that he will never see his
f1',725 again but he would rather see Zorro Ltd recover its fortunes in spite of the retail park.

L Can he petition the court for a compulsory winding up?

2 Can he appoint an administrator in the hope that the company can be rescued?

TTlFage
 Corporate Laws and Prsctices

4. The role of the liquidator

Once a liquidator is appointed, whether in a voluntary or a compulsory winding up, his role is to:

winding up)

sha res.

On his appointment, the powers of the directors cease save to the extent that they are
permitted to
continue by the liquidator or (in a voluntary winding up) by the company or creditors as appropriate.

once the liquidation is complete, the liquidator must act as follows.

dea ltwith and lay it before a meeting of the members and/or creditors. Within the following week
he should then file details with the Registrar who will enter the details on the company's file and
the company will be deemed to be dissolved three months thereafter.

dissolving the company. He then files the order and the Registrar records on the company file that
the company is dissolved as from the date of the order.

4. Priorities on liquidation
A liquidator in a compulsory winding up must, and in a voluntary winding up is likely to, adhere to the
following prescribed order for distributing the company's assets:

Priority ExPtanation

t. Costs lncluding the costs of getting in the assets, liquidator's remuneration

and all costs incidental to the liquidation procedure

These rank equallY

3. Floating charges Subject to ring-fencing (see below)

4. Unsecured A certain percentage of assets is 'ring-fenced' for unsecured creditors

ordinary creditors where there is a minimum fund for distribution of f 10,000, namely 50%
of the first f10,000 of floating charge realizations and 20% of the
floating charge realizations thereafter

5. Deferred debts For example dividends declared but not paid and interest accrued on
debts since liquidation

6. Members Any surplus (meaning that the company is in fact solvent) is distributed
to members according to their rights under the articles or the terms of
issue of their shares.

78 lt)*Pr,
 Corporate Laws und Pructices

Note that secured creditors with fixed charges (and indeed floating charges) may appoint a receiver to
sell the charged asset, passing any surplus to the liquidator. ln the event of a shortfall they must prove
for the balance as unsecured creditors.

Interactive question 3: Priorities on liquidation [Difficulty leve]: Exam standardl

Buffers Ltd has an issued share capital of 5,000 x f1 shares and is in compulsory liquidation. The
liquidator has a fund of €8,500 available for distribution and needs to distribute the fund to settle the
following claims so far as possible:

crystallized and the value is €4,000

f'1,,200

It is clear that there will not be a surplus for distribution to the members

A Which debt will be discharged first?

B Will Mr Staples receive all of the money owed to him?

C Willthe members receive the dividend?
D Do the ring-fenced provisions apply?

Following dissolution of a company (by whatever means) its property vests in the Crown as bona
vacantia (s 1012 CA '06), which means that there is no known person entitled to it. However the Crown
has the power to disclaim it, in which case any interested person may apply to the court to have the
property vested in them on such terms as the court sees fit.

5. lndividualvoluntaryarrangements

Section overview

An individual voluntary arrangement ('lVA') is an arrangement available to an individual

(including sole traders and partners) to reach a compromise with his creditors, with the aim
of avoiding bankruptcy.
lVAs are governed by the lnsolvency Act 1"986 and supervised by licensed insolvency
practitioners.

Sole traders and partners may well wish to pursue the option of an IVA in order to protect the survival of
their business. An IVA normally provides for the debtor to pay reduced amounts towards his total debt
over a period of, usually, five years. Once approved, an IVA binds all of the debtor's creditors and none
may pay petition for bankruptcy.

79 ll:rg1*
 Corporate Laws und Practices

5.1 The procedure

The individual, or more likely his nominee (who must be a licensed insolvency practitioner), submits
proposals to court, together with the nominee's comments on their chances of success, in an application
for an interim order. Once an interim order is made, creditors cannot take any action against the debtor
pending the creditors' meeting. Effectively a moratorium on actions against the debtor is put in place
(although a secured creditor may continue to enforce his security against the debtor). The nominee
must callthis meeting to be held within 14 days of the notice, which notice must include:

The creditors may reject the proposals or accept them (with or without modification) by a majority of
75% in value of those creditors who vote, either in person or proxy. Once approved, a supervisor is
appointed (who is usually the nominee) to be responsible for supervising the scheme and distributing
sums to the creditors. Upon completion of the lVA, assuming all its terms are complied with, the debtor
is fully discharged from all liabilities contained in it.

Application may be made to the court on the basis that the terms of the IVA are unfairly prejudicialto a
creditor or that there has been some material irregularity in relation to a meeting of the creditors. ln
addition, a creditor may petition the court for bankruptcy in exceptional circumstances, for example
where the debtor fails to comply with the terms of the lVA.

5.2 Advantages and disadvantages of an IVA

The advantages of an IVA are as follows

Advantages

For the individual

normal bank account (but without an overdraft facility)

and financial circumstances

bankruptcy, for example not being able to act as a director of a

limited company

bankruptcy

For the creditor

satisfaction to creditors than bankruptcy would

bankruptcy, thus enabling a higher return to creditors

80 li]::E-*
 Corporate Laws and Practtces

However, there are some disadvantages, namely

bankruptcy

possibility of hidden assets.

the terms of the IVA are not complied with, he may still be made bankrupt.
5. Bankruptcy
Section overview

petitioning the court for bankruptcy.

of a compulsory winding up in the case of a company.

6.1 The procedure

A petition is presented to the court either

or

The court hearing will normally take place at least 14 days after the service of the petition to give time
for the debtor to file objections and for creditors to attend. lf the court is satisfied that the debtor is
unable to pay his debts as and when they fall due, it will make a bankruptcy order.

Where the debtor himself petitions for bankruptcy, the court will not make a bankruptcy order where

composition or scheme with his creditors, and

IVA (s 273 lA'86).

The reason for this provision (which does not apply where a creditor petitions for bankruptcy) is to
discourage bankruptcy, in favor of an lVA, where there is this level of value in the estate as against the
total debt.
Where a creditor petitions for bankruptcy, he will be able to show that the debtor is unable to pay his
debts, if he can show that

days or

81 lt] ag *
 Corporate Laws and Practices

The creditor may present a petition within the three-week period following service of a statutory
demand where the value of the property is likely to be diminished significantly during that period. ln
such cases an interim receiver is appointed, rather like a provisional liquidator. However, if a bankruptcy
order is made, the debtor becomes an undischarged bankrupt and the order is advertised in the Gazette
and in a local and/or national newspaper.

Also from the date of the order, the Official Receiver is appointed to administer the bankruptcy and to
act as trustee of the bankrupt's estate, unless an insolvency practitioner is appointed to act as trustee
(which is likely where the estate is sufficient to pay his fees and the creditors). The Official Receiver must
investigate the debtor's financial affairs and must report to his creditors, and may report to the court.
He will also give notice of the bankruptcy order to local authorities, utility suppliers, the land registry
and any other relevant bodies or organizations. He must act to maximize the funds available to satisfy
the creditors and then pay creditors with provable debts in a prescribed order, similar to the compulsory
winding up of a company. lf there is insufficient money available to pay all unsecured creditors, the
trustee in bankruptcy will declare a dividend, i.e. so many pence in the pound, so that the creditors
receive part-payment of their debts.

6.2 The effect of bankruptcy

Regardless of who petitions the court, once a bankruptcy order is made, the debtor becomes an
undischarged bankrupt and is subject to a number of personal restrictions, for example

by handing over his property, for example.

ba nkrupt.

From the date of the petition, any payment of money or disposition of property is void unless approved
by the court. The court may stay any action against the debtor from the date of the petition and,
generally speaking, the bankrupt can no longer be sued by his creditors once the order is made. There
are exceptions however, for example a secured creditor can still enforce his security.

Most importantly, the bankrupt's estate automatically vests in the trustee in bankruptcy as soon as he is
appointed and, from the time the order is made, the Official Receiver act as receiver and manager of the
estate and must protect it pending the appointment. Such vesting occurs automatically and does not
need any written contract or transfer of rights or property.

Note that the bankrupt's 'estate' is defined to exclude

business or vocation.

bankrupt and his family

The estate is vested subject to the rights of secured creditors

82 1P,,:g*
 Corporate Luws and Practices

6.3 Distribution to creditors

The trustee in bankruptcy must require the creditors to prove their debts (which they do by completing
proof forms) and he will then rank them according to the prescribed order and make payments
accordingly. The order is as follows:

Debt Explanation

1 Costs The costs of realising the estate, the remuneration of the trustee and
incidental expenses

2 Pre-preferential As provided by certain statutory provisions, for example funeral

debts expenses
where the bankrupt is deceased

3 Preferential debts Rem.uneration of employees for up to four months subject to a

maxtmum
of €800

Sums payable in connection with occupational pension schemes

Accrued holiday pay

4 Ordinary debts Where the fund is insufficient to pay all unsecured creditors they rank
equally

5 lnterest Creditors may prove for interest up to the date of bankruptcy (and
therefore only if all preferential and ordinary creditors have been paid in
full)

5 Postponed debts For example a debt owed to the bankrupt's spouse

7 Surplus Any surplus is returned to the bankrupt (this is of course unlikely)

Once the trustee has completed the distributions, he reports to the creditors who will usually release
him from his trusteeship.

6.4 Discharge of bankruptcy

One year after the bankruptcy order, a bankruptcy is discharged (although he may be made subject to a
bankruptcy restrictions order or undertaking for between 2 and L5 years where he was culpable to some
extent for his insolvency). This means that all his debts are treated as discharged, all personal restrictions
are lifted and effectively his slate has been wiped clean. However, there may remain a certain stigma
attached to a discharged bankrupt and his credit history will have been damaged.

83 lf*g*
 Corporate Laws and Practices

PROCEDURE FOR FORMATION AND REGISTRATION OF A COMPANY

The procedure for formation and registration of companies under the Companies Act, 1994,is laid down
below:
1,. When the Promoters will desire to form a company, at first they will have to select its name and
will apply to the Registrar for the same in a plane paper with a fee of IK.5/- for each name along
with the properly executed deed of settlement or the minutes of their first meeting.
2. The Promoters may primarily select the name of their proposed company through searching the
list of companies by the use of www.registrationofcompaniesbangladesh.com website.
3. The deed of settlement/minutes of the first meeting of the promoters may be prepared in plane
paper and then to be signed by allof them and amongst others it must contain the name, address
and occupation of the authorized person with his connection with the proposed company who will
apply for the clearance of name.
4. After obtaining the name clearance the Promoters shall prepare and print the Memorandum and
Articles of Association which shall be signed by them before at least two witnesses.
5. The Promoters shall collect the necessary special adhesive stamp on the basis of authorized share
capital of the proposed company from treasury by depositing the money through treasury challan
in the Bangladesh Bank and will affix the same on the printed Memorandum and Articles of
Association of the company.
6. For the purpose of registration of a company the special adhesive stamp worth Tk. 500/- to be
affixed on the Memorandum of Association irrespective of authorized capital and stamp worth Tk.
t55l-,4OOO/- and 10,000/- to be affixed on the Article of Association for the authorized capital of
Tk. 1O,O0,0OO/-,Tk.3,OO,OO,00O /- and above Tk. 3,00,00,000/- up to any amount respectively.
7. Three copies of Memorandum and Articles of Association including the original one on which the
special adhesive stamp is affixed along with dully filled in Form l, Vl, lX and Xll, the clearance of
name and the copy of treasury challan relating to the collection of adhesive stamp to be filed in the
case of a private company and in the case of a public company a statement in lieu of prospectus
(Schedule 4), the declaration for commencement of business (Form XIV) and (Form Xl) as and when
necessary to be filled by the promoters in addition to the Memorandum and Articles of Association,
papers and documents as mentioned above (see appendix 1-5).

2. DOCUMENTS TO BE PREPARED AND SUBMITTED

For registration, the preparation and the filling of certain documents are necessary. These documents
are to be filled with the Registrar of Joint Stock Companies together with the requisite fees. The
documents to be delivered are the following:
(a) Memorandum of association signed by each subscriber and dated. The signatures of the
subscribers must be witnessed by a third person. Each of the subscribers undertakes to subscribe
for one or more shares of the company.
(b) Articles of association signed, dated and witnessed as for the Memorandum (and by the same
su bscri be rs).

(c) A statutory declaration of compliance by an advocate entitled to appear before High Court who is

engaged in the formation of a company or by a person named in the articles as a director,

84 lPag*
 Corporute Laws and Practices

manager or secretary of the company to the effect that the requirements of the Act as to
registration have been complied with [(Sec. 25 (2\1.
(d) Notice of situation of registered office (Sec. 77).
(e) Particulars of Directors, Managing Agent, Managers (Sec. 115).
(f) A list of persons who have consented to become directors (S.92).
(e) A written consent of the directors to act (5. 92). This does not apply to a private company.

Thereafter the proper stamp duty for registration has to be paid and the Registrar then enters the name
of the company on the register of companies and issues a certificate of incorporation. The company
then comes into existence as legal person.

3. EFFECT OF REGISTRATION

After registration of the company, it takes the shape of an incorporated organization under the name
mentioned in its memorandum. This organization is empowered to perform all the works of an
incorporated company. lt acquires the permanent inheritance and it shall have a common seal. The
liability of its members is limited by shares. Upon incorporation of the company it is treated as a juristic
person and it shall have a registered office.

4. EXPERT KNOWLEDGE OF MEMORANDUM AND ARTICLES

The memorandum and articles of association, bound generally in one booklet form, are the charter of
the company. While memorandum of association lays the foundation of the company, articles are the
constitution for internal administration of the company. Both need to be printed and paragraphed with
consecutive para numbers. The Act is clearly absent on the language to be adopted for framing the
memorandum or the articles. However, in the context of publication of name by a limited company it is
prescribed in section 78 that the signboard and the letterhead of a company should be in legible Bangla
or English characters. This may be treated as a hint in this respect.

The memorandum of association provides for name, place of business, object, limited liability of
members and the capital of the company. The name of the companyshould be a concrete one, separate
from any other company name. There should be the mention of a specific place of business of the
company known as the Registered Office. The Act provides at section 78(a) that the name (street no.
and place) should be prominently displayed in a conspicuous place outside the company office. The
object of the company should include all present and foreseeable future areas of activities so that no
legal complications arise on this. The memorandum should be signed by each original subscriber in the
presence of a witness who shall attest the signature.

The articles of association governs the administration of the company in that it spells out all internal
regulations such as the directors, their appointment, conduct of Board meetings, general meetings,
share transfer, books of accounts and audit etc. The articles cannot go beyond the terms of the
memorandum and it constitutes an agreement between the company and its shareholders.

The registration of articles by a company limited by shares is only optional. lt may adopt schedule I in its
-
entirely or frame its articles to meet its special needs and register it. Where the articles of a company are
silent over any matter, the regulations of schedule- I regarding that matter will apply. But a company limited
by guarantee or an unlimited company or a private company must register its articles,

85 li:)*g*
 Corporate Laws und Practices

The articles of association shall also be signed by the subscriber of the memorandum with at least one
witness. The memorandum and articles are public documents and can be inspected by any one dealing
with the company.

5. REGULATION OF SCHEDULE - ITO BE INCLUDED IN ARTICLES

The article of association of a company may include all or any of the regulations contained in the First
Schedule of the Companies Act 1994. But whatever may be the case, there are certain mandatory
regulations which must find places in the Articles, Based on section 17(2) the following regulations of
Schedule - I are compulsory for all companies, including private companies:

No of Regulation Description

56 About meetings at different places and adjournment

66 On signature of proxies

71 Directors qualification shares

95 Defect in appointment not to invalidate acts of directors
96 Directors may pay interim dividend
105 Books of accounts to be at head office and open for director's
inspection
108 Contents of profit and loss account
tt2 About appointment of auditors
1L3 to 116 Provisions for sending notices.

For the public companies and their private subsidiaries the following regulations of schedule- I are also
compulsory:

78 Disqualification of directors
79 Rotation of directors
80 Which of the directors to retire
81 EligibilitY for re-election
82 General meeting to elect directors.
lf the articles of association of any company fails to include the mandatory regulations, it will automatically
apply for the company and anything contrary shall stand null and void in the eye of law. The Act requires that
a company can exercise powers only when it is authorized to do so by its articles. Therefore care and
expertise has to be applied in preparing the articles of association of the company. The nature of business
and the administrative interests are to be considered while drafting articles. The contents of articles are
available in part - 1 (chapter -2 of the Companies Act) of this manual.

6. AMENDMENTS

There are certain statutory provisions as to alteration / amendment of the memorandum and articles of
association of the company. The following table will show the course of changes in the memorandum or
articles:

86 lF:*g*
 Corporate Laws and Practices

Changes Resolution Statutory Whether returns to be filed with section and

required obligations return form no
Name Special Permission form Required sec. 11(6) & 88. Return Form - Vlll
resolution Registrar and BOI
Registered Ordinary Permission form Needed by sec. 77(2), and return Form - Vl
Office resolution BOt
Objectives Special Permission form Amended MA with HC confirmation must be filed.
resolution BOI and High Sec. 12, L5 & 88. Form -Vlll (for allotment of new
Court shares form - XV vide section 151 (1) (a).
confirmation
Capital Ordinary None Required. For authorized capital requisite fee to
I ncrease resolution be deposited. Section 53 & 56. Form - lV
Articles Special None Required under sec. 20 & 88. Form - Vlll
resolution

Every alteration or amendment needs to be incorporated in all copies of the memorandum and articles
of association of the company.

7. EFFECTS OF AMENDMENT

Amendment in the memorandum and articles have got some statutory obligations and effects which
cannot be overlooked. ln the case of amendment of memorandum, section 10 lays down that a
company shall not alter the conditions contained in its memorandum except in the cases and in the
mode and to the extent for which express provision is made in the Act. Again, in section 20 it is
prescribed that the conditions of articles can be altered by way of special resolution provided that it
does not conflict the Act or the memorandum, The cases and places of amendments are listed in the
previous topic. Here the effects of a few of the changes are amplified.

Name: The shareholders may decide to change the name of their organization by passing a special
resolution at any time. But before tabling the issue in a general meeting the Board has to decide, propose
and resolve about the new name of the company. The corporate secretariat, after a new name is adopted
by the shareholder at a general meeting, will then approach the Board of lnvestment (BOl) of the
Government of Bangladesh with an extract of the resolution for approval and confirmation of such
changes. The change will not affect any right and obligation of the company or render defective any legal
proceeding by or against the company. The Registrar must also be informed of the change in appropriate
format (i.e. in form Vlllfor special resolution)together with an extract of the resolution and with a copy of
BOI's confirmation of the change. The time limit for this return is fifteen days from the date of resolution
(sec. 88). However, any change in the name of a company will not be effective until it is approved by the
Registrar [sec. 11(6)]. This change should be carried out in all documents of the company, primarily in the
memorandum and articles, share certificates, letter pads, bill-heads, sign boards and elsewhere after
alteration duly approved and confirmed.

Registered Office: The Act does not define a registered office but instead has laid down special
emphasis on having a known seat of office of a company and also on forming the Registrar about it.
Strong penal provision is there in section 77 for not sending notice of situation of a registered office or
of any change therein to the Registrar.

From the term it can be construed that registered office is the one which the company declares to be its
place of office at the time of incorporation or afterwards but within twenty-eight days of incorporation.

R7
"' ll],1"': ,,.:"
t'
 Corporate Lah,s and Practices

The matte of registered office has come up even earlier in the Act in section 3 dwelling on jurisdiction of
the court. At an interpretation given in section 3, registered office is explained to mean 'the place which
has been the registered office of the company during the six months immediately preceding the
presentation of the petition for winding up'.

The situation or change of address of the company is not an ordinary matter to deal with. The
memorandum of association mentions about registered office, though not very distinctly, at the
beginning of it. And once the memorandum is filed with the Registra4r, change in situation of its office
will require certain formalities to be followed. This includes informing the Board of investment and
obtaining its confirmation and a return in form Vl to the Registrar.

However, section 77(3) stipulates that the notice of situation or change of situation of the registered
office cannot be made by way of any collateral document. lt has to be made separately by a return (in
form -Vl) the time limit for which is twenty-eight days from the date of situation or of any change
therein. lf it is a listed company, such a change has also to be intimated to the Securities and Exchange
Commission and the stock exchange.

Object: Change of object is bothersome. A change in the object clause requires (i) a Board resolution to
decide about the necessity and exact amendment, (ii) special resolution of shareholders to pass the
amendment, (ii) intimation to the BOI about change in the object clause, (iv) petition before the High
Court for confirmation of the amendment, and (v) a return to the Registrar within fifteen days of
resolution (sec. 88) enclosing form - Vlll duly filled out with extract of special resolution.

On the petition for confirmation of amendment the court will accord its sanction if it is satisfied that
sufficient notice has been given to all concerned and consent of creditors obtained or their claims
discharged to the satisfaction of the court. A certified copy of the order confirming the alteration
together with a copy of the amended memorandum must be sent to the Registrar within ninety days of
the date of order to note the changes and to issue a certificate for conclusive evidence (sec. 15). The
alteration will be effective on the Registrar's certifying that the alteration has been registered, A
certified copy of the return together with certified amendment from the Registrar may also serve the
purpose. The provisions relating to change of the object are contained in section 12 to 16.

Capital: A company limited by shares may alter the conditions of its memorandum for amendment in
the capital clause, if authorized by its articles [sec.53(1)]. The procedure for alteration of capital is
rather simple because the company can exercise its powers in this respect simply in a general meeting
without the consent of the court and the resolution need not be special or extraordinary, unless the
articles of the company so provide. The conditions of the memorandum may be altered with a view to:
a. lncrease its share capital by the issue of new shares of such amount as it thinks proper;

b. Consolidate and divide all or any of its share capital into shares of larger denominations;

c. Convert all or any of its paid-up shares into stock and reconvert that stock into paid-up shares of
any denomination;

Sub-divide its shares or any of them into shares of smaller amount than is fixed by the memorandum;
Cancel shares which, at the date of passing of the resolution in that behalf, have not been taken or
agreed to be taken by any person, and diminish the amount of its share capital by the amount of the
shares so cancelled. This cancellation, however, shall not amount to reduction of capital within the
meaning of the Act.

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It is further provided in sub-section (2) of this section that the powers conferred by this section must be
exercised by the company in general meeting. A notice specifying the alteration should be given to the
Registrar within fifteen days of the alteration in case of increase (sec, 54).

8. AMENDMENT OF ARTICLES OF ASSOCIATION

Any amendment in the articles of association requires a special resolution. lt is provided in section 20
that, subject to the provisions of the Act and the memorandum, a company may, by special resolution
alter or add to its articles. Any alteration or addition so made shall be as valid as if originally sanctioned
in the articles.

However, the general restrictions inherent in the power of the company to alter its articles are
explained below:
a. The articles can only be changed by passing a special resolution and not by passing any other type
of resolution.
b. Even the passing of a special resolution will not be effective if it is inconsistent with an existing
article and a special resolution has not been passed in previous meetings altering that article.
c. The alteration must not contravene the provisions of Companies Act.
d. lf any additional financial obligation is created on any member by altering the articles, the
alteration shall be binding only if the consent of such member in writing has been obtained before
or after the passing of such resolution.
f. The alteration in the articles should be fair and for the benefit of the company as a whole and not
for a class or group of members only.
g. Articles must not be amended to commit a breach of contract with outsiders.
h' By the amendment, articles cannot give to a person, whether a member or not, any right in a
capacity other than that of member, as for instance as solicitor, proper etc. for such a right cannot
be enforced against the company.

i. lf proper and due notice of the facts and effects of the proposed alteration is not given in time to
all shareholders, the meeting would be invalid and such an alteration would be of no effect.
j. The alteration approved should not be such as would constitute a fraud by the majority on the
minority.
k. The alteration must not be opposed to the provisions of the memorandum of association and
particularly its object clause.

Every special resolution amending the articles of association must be supported by a return to the
Registrar within fifteen days of passing of the resolution as required under section 88 of the Act.

9. RETURNS TO BE FILED AND THE TIME FRAME

The Companies Act 1-994 is the prescription to guide and control the activities of the registered
companies. lt also, in its text and spirit, exercises some protection to the shareholders, in that it requires
some returns to be filed to the Registrar of Joint Stock Companies which have bearing on the
shareholders' interests. Returns are nothing but disclosure of some facts as per the relevant sections, in
the prescribed format to the Registrar.

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The submission of returns are mandatory, failure of which leads to various penalties and other
complications. Therefore, due care is to be laid in submitting returns as per statutory time limit and
according to various provisions. Some important returns as per different sections are given below:

L. Returns of Allotment [Form XV]: To be filed within 60 days after the date of allotment (section
151). The capital allotted to be added and entered in the next annual list of members and
summary.

2. particulars of Mortgage (PM): To be filed within 21 days after the date of execution of the
mortgage deed (section 159).

3. Particulars of Modification of Mortgages (PMM): To be filed within 21 days after the date of
execution of modification deed [section 167(3)].

4. Particulars of Satisfaction of Registration of Office (PSM): To be filed within 21 days from the
date of satisfaction of the loans or debts (section 172).

5. Notice of situation of Registration of Office: To be filed within 28 days after establishment or

change of the registered office [section 77][Form Vl].

6. Proceeding of Special or Extra Ordinary Genera! Meeting: To be filed within 15 days from the
date of meeting (section 88).

7. Prospectus: On or before the date of issue of the prospectus (section 138).

8. Change of name of the company: To be filed within 15 days from the date of special resolution
relating to change of name [section 11(6)and 88].

9 Change of Memorandum of Association: To be filed within 90 days from the date of order of the
court or within the extended period sanctioned by the court [section 12 and 54].

10. Notice relating to consolidation or sub-division of shares or the conversion of shares into stock: To
be filed within 15 days from the date of change or conversion [section 54].

11,, Conversion of private company into public company: To be filed within 30 days after the date of
taking decision of conversion [section 231].

12. Conversion of public company into private company: To be filed within L5 days from the date of
taking decision of conversion [section 232].

13. Notice of increase of share capital or the number of members: To be filed within L5 days from
the date of taking decision of such increase [section 56].

10. STATUTORY RETURNS

A company having share capital and incorporated under the Companies Act, 1994 shall have to file the
following statutory returns to the Registrar every year:

t The annual list of members and summary [Schedule-X]:- To be filed within 21 days after the date
of holding the annual general meeting. The transfer of share if any shall be entered or reflected in
this return.

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2 Balance sheet and Profit & Loss accounts: To be filed within 30 days from the date of annual
general meeting (section 190). The profit and loss accounts to be filed separately in the case of a
private company.

3 Consent of auditor [section ZLOI- The company shall inform the auditor or auditors in respect of
his / their appointment within 7 days from the date of annual general meeting and the auditors
shall inform the Registrar whether the appointment has been accepted or refused by him or them
within 30 days from the date of receipt of such information.

4. Statutory Report: lt is applicable in the case of public limited companies (section 83).

5. Particulars of directors (Form Xll):- The information in respect of appointment of Directors or any
change thereof and in the case of retirement of Directors by rotation and re-election in public
company.

6. The consent of Directors to act (Form lX), section 92

lL. STATUTORY BOOKS AND REGISTERS

To meet the requirements of Companies Act, it is obligatory to maintain certain books and registers
which should record the important data and information of the company. Because those are specifically
prescribed by the statute, in addition to the customary books and records, they are called
the statutory
registers. lt is to be mentioned that the Act, in cases, allows gap in specifically mentioning about
requirements of some registers, but instead has, in the length of the particular section, given the sense
of those registers. Such a few cases are sections 38, !48,176 etc. where it is not precisely mentioned
that a register has to be maintained, though those cannot be overruled. The Act also requires the
registers to be open for inspection by those concerned. Also there are some other books the purpose
of
which cannot be dispensed with. Those are the subsidiary registers. The fact that various statistical
and
financial information are available in those documents, they are called the statistical registers.

The following are the statutory registers:

1,, Member Registers (section 34): lt contains names, addresses and descriptions of the members,
number of shares held, distinctive numbers, number of certificates, amount paid, shares
transferred, date of becoming a shareholder and the date of ceasing to be shareholder. An entry
in this register is the prima-facie evidence of membership in the company.

For companies having more than fifty shareholders, an lndex of members (sec. 35) is also
necessary, if,
however, the members register is not in a shape to contain an index in itself. This should contain
sufficient indication so as to enable the account of any member in the register be readily traceable.
There should also be a register or a file to contain the Annual list of members and summary
of share
capital [sec' 36(3)] which is required to be filed with the Registrar every year after the annual general
meeting. The register of members is of vitally important and the maintenance of which
must be
followed meticulously.
ln case of any Iapse or breach, the court may, on the application of any member ask
the company to
rectify the register (sec. 43). lf a company makes default in complying with the requirements
of section
34, it shall be liable to a fine not exceeding taka one hundred for every day during which
the default
continues and every officer of the company who knowingly and willfully authorizes or permits
the
default shall also be liable to like penalty.

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2. Register of Directors (sec. 115): The company is obliged to maintain a register of its directors. The
names, nationalities, addresses, occupations and other business connections of all directors, with
date of becoming or ceasing to be directors are entered in this book. All changes of the particulars
of the directors are also to be noted in this book with the date of change. lf the company fails to
maintain this register, the company and every other officer of the company knowingly and in
default shall be liable to a fine of Taka five hundred.

3 Register of mortgages and charges (sec. 174): There should be a register to record all mortgages
and charges specifically affecting the property of the company. This register contains the kinds,
particulars and descriptions of the mortgages, the amount received and description of the
property in respect of each mortgage and the names of the mortgagees or the persons entitled
thereto. lf any director, manager or other officer of the company knowingly and willfully
authorizes or permits the omission of a ny entry required u nder section 17 4, he shall be liable to a
fine not exceeding Taka two thousand.

4 with Directors (sec. 130): lt must contain the full particulars of all contracts
Register of contracts
or arrangements in which any director is directly or indirectly interested. This register also is
indispensable and every officer of the company who knowingly and willfully acts in contravention
of the provisions of this section shall be liable to a fine not exceeding Taka one thousand.

5 Register of Debenture holders (sec. 176): The full particulars of the debenture holders, their names,
addresses and occupations, the date of allotment and redemption, the number of debentures held
by each, distinctive numbers, amount paid upon each debenture, the dates when paid and transfers
in respect of any debenture are all to be incorporated in this register. The Act in this section does not
say that this register is necessary, but starts with inspection of such a register. However, treatment
of this book is almost the same as with the register of members'

6. Minute Books (sec. 89): These are used for recording all resolutions and the proceedings of
meetings of the directors and the members of the company. Two minute books are maintained,
one being directors minute book and another for the meetings of the shareholders'

The shareholders minute book should be kept open for inspection by any interested members and copy
of extracts thereof furnished if so requested. lf any such inspection is refused or copy not provided, the
company and every officer of the company who knowingly and willfully is in default shall be liable in
respect of each offence to a fine not exceeding Taka one hundred and a further fine of Taka one
hundred for every day during which the default continues. ln case of any such refusal or default, the
court may by order compel an immediate inspection of the books in respect of all proceedings of
general meetings or direct that the copies required be sent to the persons requiring them. However,
directors' minute books cannot be inspected by anybody other than a director or the auditor of the
company.

T2. STATISTICAL BOOKS

Statistical Books are required more of necessary than by the Act and are subsidiary in nature. The
following are some of the commonly used statistical books:

1. Application and Allotment register (sec. 148): This book contains names, addresses and
occupations of the applicants of shares, the amount of application money received, number of

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shares applied for, the number of shares allotted, their distinctive numbers, if any money is
refunded its particulars, cheque number, date etc. The register is required in case of a new
company or at the time of share flotation for public subscription. The particulars in this book are
important till filing the Allotment Return, after which the descriptions are shifted to the register
called the members register. The Act is not very clear about such a register. But the particulars as
mentioned in section 148 cannot be properly recorded and maintained or monitored unless such a
register is there.

2 Register of Share Transfer (sec. 38): This register contains the names, addresses and occupations
of the transferor and the transferee, number of shares transferred, date of transfer and the
number of share certificate. This register though not specifically mentioned in this section, cannot
be dispensed with if the details of all transfers are required to be kept in one concise place. Such
details may be necessary for any future use; say for any case of litigation.

3 Share Certificate and Debenture Book: The details of each share certificate and debenture
certificate in relation to their number, distinctive number, number of shares contained in each
certificate, name of the holder of the certificate etc., are recorded in these registers. They are also
called scrip register which contains the details of share scrips.

4, Attendance Book: This book is necessary to record the presence of directors in the board meeting
and the amount paid to them as their attendance fees. Signatures of all the directors present in
the meeting are recorded in original and when there is any absence, the reason is laid down if it is
a leave of absence against the director's name (regulation 76).

5. Agenda Book: The agenda book contains, in the left hand side, the agenda points, in chronological
order and in the right hand side- noting of the Company Secretary as per agenda. This is very
helpful for preparing the minutes of the meetings after the meeting is over.

6 Proxy register: This book records, meeting wise, the detail of proxies received from different
members. lt facilitates a permanent record of who was the proxy and who appointed him and for
which meeting. This may be necessary for any future use.

13. BOARD MEETING

This means the meeting of the board of directors. This is purely an in-house event. Directors are the
elected representative of the shareholders and the control and administration of the company affairs
are vested in them. That requires them to meet from time to time to discuss and decide matters relating
to policy and for reviewing its affairs and progress. ln this way, they exercise their control over the
company and discharge their responsibilities to the shareholders.

Procedures: The procedure at the Board meeting is less formal than the general meetings and the
directors may regulate their own meetings. Articles may also provide for the codes of conduct. But those
cannot move past the Act. The directors sit for the board meeting frequently, However, the Companies
Act 1994 requires that the Board must meet once in every three months and at least four time a year
(sec. 96). The directors may meet more often but they must meet together as a board to
constitute a
valid board meeting.

Notice: The chairman, managing director or any director can issue notice calling a board meeting. The
company secretary on the requisition of any one of the above shall convene a board meeting. Such a

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notice under the signature of the secretary should be qualified by the words: "By order of the Board." A
meeting convened by secretary without authority may, however, by ratified by the directors at the
Board meeting. All the directors are entitled to notice of such meeting at their usual address at a
reasonable time with details of the agenda. Notice need not to be given to a director who is out of
Bangladesh for the time being. Section - 95 says that notices of Board meetings are to be served to
directors residing in Bangladesh only.

The length of notice should be reasonable. No such time is prescribed by the Act. Extremely short notice
is acceptable if all directors can attend but if a short notice is issued to exclude a particular director, it
will render the meeting void. The notice should mention the day, date, time, place and number of the
board meeting. lt should also include agenda of the meeting.

Agenda: the agenda points should be clear, lucid and unambiguous. Three is nothing in the Act on this.
However, the agenda needs to be arrayed in good order so that matters are transacted conveniently at
the meeting. The order of business set out in the meeting should be adhered to. lf for convenience of
some directors it is desired to change the order, consent of all directors should be obtained by the
chairman at the meeting, The Board however, can take the business in any order as if thinks proper,
provided that the directors present consent to it.

Quorum: The quorum requisite for directors meeting is subject to the provisions of the Articles of
Association of the Company. Regulation 89 of the Companies Act, however, provides that the quorum
necessary for the transaction of business at the board meeting may be fixed by the directors, and unless
so fixed, it shall (when the number of directors exceeds three) be three. Business at the board meeting
will be valid if only quorum requisite is present. But this quorum should consist of disinterested
directors. This is because, the directors who are directly or indirectly interested in certain matters/ are
not entitled to vote on the resolution of such matters. This is called disinterested quorum. lf at a board
meeting, there is no quorum, the meeting will be automatically adjourned to the same day next week at
the same time and place. lf the day, to which the meeting so adjourned, is a public holiday, then the
meeting will be held on the next working day. These all of course, are subject to the provisions of the
Articles.

Proxy: There is no room for proxy in the Board meeting. The merit of directorship is limited to the
appointed individual only which cannot be delegated to any other person. So no proxy is allowed in
directors meeting. A director cannot send his representative or relation to attend and vote for him in
board meeting.

Chairman: There should be a chairman to preside over the board meeting. The directors may elect a
chairman for their meeting and determine the period of office for which he is to hold the position (Reg.
91). There may, as well, be a permanent chairman from amongst the directors. He will preside over all
the board meetings. When he is absent, a chairman may be elected temporarily to conduct the meeting.
The permanent chairman is usually is empowered to act as the chairman of the general meeting of the
shareholders. This custom has other important aspect also. When in the general meeting there will be
an equality of votes, the chairman of the m.eeting will have a second and casting vote which may shape
the resolution. To protect that right of the vote, it is usual that there be a permanent chairman.
However, these provisions must be there in the articles which govern the administration of the
company.

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T4. BUSINESS AT THE BOARD MEETING

The directors in their meeting may take up anything of the company, which do not fall within the
purview of the members meeting, for transaction. However, the usual businesses transacted at a Board
meeting are as follows:
1,. Determining overall business and management policy.
2. lssuance, allotment, call and forfeiture of shares.

3. Approving transfer and transmission of shares.

4. lssuance of debentures and allotment thereof.

5. Exercise borrowing powers.

6. lnvestment of company funds.

7. Appropriation of profit with recommendation of final and declaration of interim dividend.
8. Adopting annual report.
9. Convening general meeting.
10. Fixation of the period of book closure.
1,1. Framing and approval of company contracts and agreements.
1,2. Recording and correction of statutory books.
13. Filing of various returns and statements.

14. Review progress and affairs of the company.

15. Conduct nay specific inquiry.
1,6, Appointment, promotion and dismissal of staff.

15, NOTICE OF MEETINGS

Notice, in corporate terminology, is an information, intimation or invitation in writing, of any meeting to

persons who are entitled to participate in it for due deliberations. For a meeting to be valid, notice must
be served to persons who are entitled to receive the same. However, accidental omission or non-receipt
of notice byanyindividual membershall not invalidatethe proceedingsof a meeting [sec.85(1) (b)]. But
the notice must be clear and absolute so far as the date, time and place are concerned. Also, it should
state clearly whether it is annual or extraordinary meeting. All general meetings except an annual
general meeting would require a 2l- clear days notice [sec. 85(1) (a)].

The notice must give substantial information as to what is proposed to be done in the meeting.
Resolutions passed upon insufficient notice may be invalid. lf specific business is to be transacted, the
notice must state clearly its nature. For example, notice of a meeting to increase the capital must specify
the amount of the proposed increase. However, the terms of any specific resolution to be proposed
need not be set out in the notice, unless an extraordinary or special resolution is intended to be passed.
For a Board meeting, however, notice indicating the main lines of items to be covered will suffice.

The notice of company meetings are governed, in general, by the following rules:
1,. Notice is to be issued with due authority granted by the directors. For all purposes, only directors
are authorized to convene a meeting. The Company Secretary may issue notice for a meeting, but
his signature must be qualified by the words "by order of the Board.,'

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16. AGENDA

The list of items to be discussed at any meeting is called the agenda, literature meaning - things to be
done. lt serves the purpose of a systematic array of the items of business in their order of importance,
defines the nature of business for information of the persons concerned and also, in this way puts a
check on any omission or commission of the matters to be discussed. The steps to be taken in the
preparation of agenda are as follows:
a) The success of a meeting depends largely on the careful array of the agenda points. Therefore,
agenda should be clear and explicit summary of the business of the meeting.
b) The items of agenda may be stated briefly with subject headings of the matters, such as: i)
confirmation of minutes of the last meeting, ii) directors report, iii) declaration of dividend etc.
c) The agenda should be circulated along with the notice so that the members may think over the
various matters and come prepared with their considered views. Agenda may form part of the
notice, or may even be given in a separate sheet attached to the notice. This may help make
expeditious disposal of the matters.
d) ln preparing agenda, routine matters should be placed first and controversial or time involving
matters following. lf this order is maintained the routine matters will be dispatched quickly and
lengthy matters next, or if the time does not permit, those may be deferred to the following
meeting or in the adjournment thereof.
e) The agenda points should contain sufficient blank space against each item so that participants in
the meeting, or even the Chairman or the Secretary may take down some notes on it.

T7. QUORUM

Quorum is the minimum number of persons required to enable a meeting go into session. ln order to
serve the purpose of a meeting, it is desirable and necessary that it should be attended by a moderate
number of its members to prevent misuse or abuse of powers. For this reason, a convention has grown
up for minimum attendance in a meeting. The number of this minimum attendance, which is otherwise
known as 'quorum', is laid down in the rules for quorum. The articles usually provide a reasonable
number of required attendances. Without quorum a meeting is invalid. The quorum must be present
before a meeting can proceed to business. The quorum requisite is generally a matter of Articles of any
company. However, Regulation 52 provides that the quorum be present at the beginning of the meeting
and not throughout the meeting. Any resolution passed without a quorum at the outset will render the
whole meeting void. But quorum at the beginning will validate all resolutions, even if subsequently there
was no quorum.

lf the quorum be not present within five minutes of the stipulated time, the meeting is adjourned to
next week, same day and time. lf at the adjourned meeting also there is no quorum, the remembers
present will from the quorum. lf at the requisitioned meeting of the shareholders, there is no quorum
for half an hour, the meeting stands dissolved.

18. MOTTON

Motion is a proposal which is formally put before a meeting for discussion and decision with or without
amendments. A motion when passed is called a resolution. A motion may, therefore, be called 'proposal
resolution'. The requirements to move a motion in a meeting are that;
a) lt has to be in writing so that a copy of the motion can be passed on to the Chairman for his
consideration.

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 Corporate Laws and Practices

b) It should usually be seconded by somebody. However, there is no hard and fast rule that it is
required to be seconded by someone.
c) It must be within the powers of the meeting and the scope of the notice covering the meeting.
d) It needs to be framed in definite and unambiguous words and in affirmative terms.
e) It should commence with word 'That' so that when passed it reads 'Resolved that'.

19. VOTING

Shareholders may claim the use of voting as a matter of right. Such right is endowed to them by section
85(1). But to exercise the right to vote, a shareholder must be present in person or proxy. Then again, on
a show of hands a proxy cannot vote. Shareholders present may demand a pool on any question other
than selection of Chairman of the meeting or the adjournment thereof. On a poll votes may be given
either personally or the proxy. Apart from sec. 85(1), regulation 6L, 62, 63, 64 e) deals with votes of
members.

20. PROXY

A proxy is a written document authorizing the person named therein to vote at a meeting for and in
place of the appointer. The term proxy is also applied to the appointee. A shareholder entitled to attend
and vote at a meeting is entitled to appoint a proxy in his stead to represent him at the meeting. This
privilege is allowed by sec.85 and regulations 61to 68 of the Act. The person appointed as proxy may or
may not be an existing member of the company concerned.

There is, however, difference between a proxy and representative. A proxy is appointed by an inclividual
shareholder who, necessary, is another person. But when the shareholder is a corporate body, it is
represented through an authorized person who, in the meeting concerned, will be known as
representative and not just a proxy in anybody's place. Such a representative, according to sec. 86, will
exercise the same powers on behalf of the company which he represents, as if he were an individual
shareholder of that other company.

It seems that the job of a proxy is only to attend and vote at a meeting. But if a shareholder appoints a
proxy, he can still attend the meeting and vote regardless of whether or not he has given notice of
revocation. A vote by proxy, in that case has to be rejected.

The proxy form, usually supplied by the company, duly executed and stamped must be deposited with
the company concerned at least 48 hours before the meeting (reg. 67). This was a mandatory provision
in the old Act of l-913, but is not made mandatory in the Act of 1994, may due to oversight. Section 15
of the Securities and Exchange Ordinance 1969 on regulation of proxies may also be noticed.

2L. MINUTE

Recording in minutes: lt is the chairman who will decide what to and what not to record in the minutes.
The chairman at his absolute discretion may omit to record in the minutes any matter which is or could
reasonably be regarded as defamatory of any person, or is irrelevant or immaterial to the proceedings
or is detrimental to the interest of the company. This discretionary power, however, does not entitle the
chairman to omit to record a resolution passed at the meeting.

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 Corporate Laws and Practices

Corrections of minutes: There may be occasions where it would be desirable to make a correction in the
minute. lf any correction is necessary, that can be done by a resolution and recorded in another minute.
But in no case the original minute should be deleted, erased or crossed out.

22, ISSUES AND ALLOTMENT OF SHARES

ln the course of formation of the company or consequent upon any expansion program, shares are
issued for subscription. A public company after incorporation often issues prospectus inviting public for
subscribing to the capital of the company. Banks collect share application money and send those to the
company concerned. The applicants are allotted with shares on the basis of their application. lf
subscription surpasses the extent of the offer, the matter is generally settled in the following ways:

a)

i. Full allotment is made to the applicants of minimum acceptable units.

ii. Allotment is made for the remainders on pro-rata basis.

iii. Refund warrant is issued for the balance amount.

Or
b)

i. Allotment is made by lottery or as prescribed by the Securities and Exchange

Commission (SEC).
ii. Refund warrants are issued to the unsuccessfulapplicants.

23. Initial Public Offer or IPO

Business is like a wheel. lt keeps moving, and it moves, it expands. When it expands, it needs further
as
fund to finance the expansion. This fund may be generated from: 1) internal mobilization of resources,
2) bank finance, 3) lease finance, 4) suppliers credit and 5) public floatation of shares etc. ln our present
context, we will focus on public flotation of shares.

24. EQUITY

This is the fund available to the organization in the form of capital. Equity, however, also includes the
profit generated internally and remaining unpaid to the owners. So, equity consists of capital, reserves
and undistributed surplus. When a company, generally the big industrial enterprise, with public limited
status, cannot cope with the ever increasing demand of equity, say for working capital needs or for
meeting the current commitments because of businesses expansion, it takes recourse to public
flotation. This is a common, increasingly popular and widely accepted means of raising fund or capital
from the market. There are two ways of raising capital from the market, viz. 1) by offering of shares, and
2) by offering of debentures,

1.. Sale of shares: Shares of public limited companies are offered in the open market for buying by
the public which is called public subscription. This is an open invitation to the public to participate
in the ownership of the company and thereby taking the risk of profit or loss of the undertaking to
the extent of their participation. This extent of participation is what is generally referred to by the
phrase 'limited liability' of the company. The buyers of shares are then known as the shareholders
of the company. They sit yearly in a meeting called the annual general meeting, appoint the

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directors of the company and engage them for running the business. This is the whole philosophy
behind public participation in shares of a company.

2 Issue of debentures: Debenture is an instrument acknowledging a debt by the company. lt can also
be offered for sale in the open market. The amount borrowed from the public by the sale of
debentures is refundable with interest over a period of time. Debentures are issued usually in bonds
by a company and are offered by means of prospectus. The formalities for floatation of debenture in
the market are the same as in the case of shares. However, in the case of debenture a trust is
required to be created before the same is offered to the public. ln the case of debenture issues,
credit rating and worthiness of the company is an important factor.

25. FORMALITIES IN PUBTIC SUBSCRIPTION

The following are the steps required for making a public offer of shares:

1. Drafting of a prospectus.
2. Sanctioning of capital by the Securities and Exchange Commission beyond certain limit.

3. Approval of the prospectus by the SEC.

4. Filing of the prospectus with the Registrar of Joint stock companies.

5. Underwriting agreement with the underwriters.

6. Arrangement with bankers and Manger to the lssue.
7. Listing with stock exchange.

8. Publication of prospectus.

9. Data entry and summation of applications.

10. Board meeting for consideration of allotment.

11,. Allotment under SEC guidelines, within a time limit.

12. Refund of excess subscription, if any, within a time limit.
13. Return of allotment to be submitted with the Registrar of Joint Stock Companies within a time
limit.
3.4. Share certificates are to be issues within a time limit.

28. UNDERWRITING

Underwriting means a contract to take up a number of shares of the company in consideration of the
payment of a certain amount of commission, in case the issue is not fully subscribed
for. Those who
enter into this contract are known as underwriters. As we have seen before, commission for
underwriting must be allowed by the articles and the prospectus must disclose the rate of the
underwriter's commission.

29. ALLOTMENT RULES

The general rules and procedures governing allotment of share are as follows:

1' No allotment can be made before filing of the prospectus or a statement in lieu of prospectus
with
the Registrar of Joint Stock Companies [Sec. 1_38(1)and 141(1)].

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 Corporate Luws and Practices

2. Allotment is to be made on the basis of application on prescribed form. The acceptance of

application should be absolute, unqualified and needs to be communicated to the applicants.
Mere entry of the applicant's name in the register is not sufficient to establish that allotment was
made.

3. No allotment can be made unless applications to the extent of minimum subscription as stated in
the prospectus have been received and at least 5% of the minimum subscription has been

received in cash [sec.148 (1)].

4. All moneys received from the applicants must remain deposited in a scheduled bank. The money
cannot be withdrawn before the receipt of the certificate of commencement t148(4)l
5. The company shall proceed to make allotment after closure of the subscription list (DSE Listing
Regulations).
6. The work for dispatch of allotment letters after receipt of the applications must be completed
within 40 days after the closure of subscription list (Listing Regulations).
7. ln case the prospectus contains reference that application will be made for shares to be traded on
the floor or recognized stock exchange, that applications is to be made soonest possible.
8. Within sixty days after allotment, the company must file with the Registrar a Return of Allotment
according to section 151 in respect of shares allotted for cash and otherwise than for cash.

30. RENUNCIATION OF ALLOTMENT

Renunciation means giving up claim in favor of others. The allottee may be given the right of renounce
his title to the shares in favor of his nominee. For this, the allottee will have to forward to the company a
Letter of Renunciation, a printed copy of which is often attached to the letter of allotment or generally
printed on the reverse side of the allotment letter. The renunciation is preceded by a letter of request
from the nominee to the company requesting for enrollment if his name in the register of members in
place of the original allottee. The company generally on its own allows a specified date for such
renunciation, otherwise, the name of the original allottee will be entered on the register and the
transfer after that date will follow the usualtransfer procedures.

31. ISSUE OF SHARES AT A PREMIUM AND DISCOUNT

public'
It is not always that shares of the company have to be issued at par value for subscription by the
by the
Depending on specific circumstances, a company may, subject to certain control and restrictions
government, issue its shares at discount, i.e. at a price below the nominal value; or at a premium, that is
Act for
at a price more than the actual value per share. There are specific provisions in the Companies
both situations which are discussed below:

32. ISSUE OF SHARE AT A PREMIUM

Shares may be issued at a premium that is at a price more than their face value. The Companies Act
provides that a company may issue shares at a premium, but stipulates specific application of the
premium fund (sec. 57). There is also no prohibition in the Act against issue of shares at differential
premiums. But such premiums are to be transferred to a separate Share Premium Account and utilized
for certain specific purposes, such as:
paid bonus shares'
a) ln paying up un-issued shares of the company to be issued to members as fully
b) ln writing off the preliminary expenses.

100 11)*g*
 Corporate Laws and Practices

c) In writing off the expenses of or the commission paid or discount allowed on any issue of shares or
debentures of the company.
d) ln providing for the premium payable on redemption on any redeemable preference shares or
debentures of the company.
e) Subject to prior approval, for adjustment or amortization of intangible assets.

Shares issued at a premium and accepted by the public establish the strength and trust owned by the
issuing company.

33. ISSUE OF SHARE AT A DISCOUNT

There is specific statutory provision for issuance of shares at a discount. Section 153 of the Companies
Act provides that a company can issue shares at a discount, i.e., at a value lee than its face value if the
following conditions are fulfilled:

a) Such issuance of shares at a discount must be

i. Sanctioned by the court,

ii. Authorized by shareholders in general meeting.
b) The resolution of the shareholders must be specific, that is -
i. lt must fix the rate of discount
ii. This rate cannot exceed 10% as the maximum.
c) The company cannot issue shares at a discount before expiry of at least one year from the date of
its commencement of its business.
d) The issuance of shares at a discount must be made within six months of the sanction of the court,
or within such extended time as is allowed by the court.

It is provided further in sub-section (2) of this section that the prospectus for the issue and the balance
sheet issued subsequently must contain detailed particulars of the discount allowed, failing which a fine
of Taka five hundred is prescribed in sub-section (3) of this section.

34. SHARE CERTIFICATE

Letters of allotments are supposed to be exchanged by definitive scrips called the share certificates. A
share certificate is often referred to as'scrip' (not script) by the trading circle, meaning an instrument
containing shares. This term is in vogue particularly in the stock exchange.

The Act provides ninety days' time after allotment by which period those certificates are to be
completed and kept ready for delivery [sec. 185(1)]

Share certificates are issued only in pursuance of a Board resolution and in exchange of allotment letters. lf
the letter is lost or destroyed, sufficient indemnity in the form of an indemnity bond and other formalities,
such as FIR at the police station and press announcement shall have to be made by the incumbent. lf the
share certificate is lost or destroyed the same procedures need to be followed. Before issuance of a duplicate
certificate, it is a good practice to notify the Stock Exchange about the matter.

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 Corporate Luws and Practices

The share certificate should also conform to certain degree of standards so far as size, thickness and
contents etc. are concerned. However, there is no such rule framed so far in Bangladesh in this regard.
Based on the usage and practice, a share certificate should match and include the following:

1. lt should look like a certificate of worth with a consecutive number.

2. Name of the company with monogram, authorized capital with nominal value.
3. Specification of the shareholder.
4. Number of shares, distinctive numbers and folio.
5. Embossed Common Seal of the company.

6. At least two authorized signatures.

7. Revenue stamp as per the Stamp Act (if required).

Share certificates should be delivered to the shareholders without incorporating the details of each certificate in
the members' register and in the scrip book. The best is to make out the computerized print.

35. SHARE WARRANTS

By virtue of section 46 of the Companies Act, a public limited company, limited by shares, if authorized
by its articles may, in respect of fully paid shares, issue under its common seal, a share warrant stating
that the bearer thereof is entitled to shares therein specified and may further provide for the payment
of future dividends on the shares included in the warrants by means of coupons or otherwise.

It is to be noted that, only public companies may issue share warrants and that too on the fulfillment of
certain conditions as stated below. A public company may issue share warrants under its common seal
provided:
1. there is authority in the articles to issue them;
2. the shares are fully paid up.

Since share warrants entitlethe bearer to the shares specified in it, and since the shares may be
transferred by mere delivery of the share warrant, it follows that a share warrant, unlike a share
certificate, is a negotiable instrument.

Section 50(1) provides that on the issue of a share warrant, the company must strike out of its register
of members the name of the member and must enter the following particulars:
1. The fact of the issue of the share warrant;

2. the description of the shares included in the warrant, distinguishing each share by its number;
3. date of issue of the warrant.

37. RIGHT SHARES

Right shares are those shares which are issued after the original issue of shares, but having an inherent
right of the existing shareholder to subscribe to these shares in proportion to their holdings. This right
has been conferred on the equity shareholders by the Companies Act in section 155(1). This right has
authorized the directors to issue right shares. The articles of the company may also include similar

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 Corporate Lat)s and Pructices

provisions. These shares can, however, be issued to the non-members when the existing shareholders
renounce or do not accept the offer within a prescribed time limit. The issue of right shares must be
within the limit of authorized capital of the company.

Generally right shares are issued to the existing shareholders at a concessive rate, that is when the
prevailing market price of the shares are much above par they are offered to the existing shareholders
at nominal value. Alternatively, if shares are sold in the market at par or even below the face values,
right shares may be offered at a price lower than that.

Right issues are to be made as per SEC guidelines and listing regulations. According to regulation 22(1) of
the DSE listing regulations, a listed company shall issue entitlement letters or right offers to all the
shareholders within a period of forty five days from the date of re-opening of the share register of the
company closed for this purpose.

38. BONUS SHARES

The company may capitalize its accumulated resources and profits by the issue of shares called bonus
shares. Bonus shares are issued by ploughing back un-appropriated profit or reserve in order to
strengthen the capital structure or to meet the working capital needs of the company.

But the articles of the company must permit the issue of such bonus shares. Like the right shares, the
bonus shares are also issued to the existing shareholders in proportion to their shareholding and
dividend rights. But bonus shares cannot be renounced. Often bonus shares are issued in lieu of
dividend. So bonus shares may well be termed as dividend in kind. However, in the annual return bonus
shares are shown and included as cash issue. The right shares of the bonus issue do not affect the rights
of the existing shareholder in any way.
The requirements to issuance of bonus shares are outlined below. lf bonus shares are to be issued by a
company:
1. There must be like provisions in the company's articles.
2. lts authorized capital must be sufficient to cover the same.
3. The shareholders must resolve to capitalize profits or to apply the share premium account or
utilize other reserves and to issue bonus shares.
4. The shares must be allotted by a Board resolution in the proportion determined by shareholders
in general meeting.
5. A return of allotment must be submitted to the Registrar within sixty days after allotment of
sha res.

39. TRANSFER OF SHARES / DEBENTURES

Shares are movable properties and transferable from one person to another in a manner provided by
articles Isec, 30(1)]. But the fact of this transfer must be intimated to the company together with the
share certificate or the letter of transferee. lt is to be remembered that share certificate is not a
negotiable instrument in the first place, but it can transfer hands subject to endorsement, registration
and delivery by the company concerned. The transfer instrument duly executed by both parties and
properly signed must be deposited to the company office together with the certificate [sec.38 (3)]. The
company Secretary will then place it before the Board for approval of that transfer and on approval he
will endorse the name of the transferee at the back of the share certificate under authorized signature.

l03 lP::9,*
 Corporate Laws ond Practices

The share certificate, with transfer endorsement, should be ready to be returned to the new owner
within ninety days from the date of lodgment for transfer [sec. 158(1)]. This time limit, according to DSE
listing regulations, however, is 45 days and as per the SEC-7 days which is puzzling indeed. The
important statutory provision in this regard is that'if a company refuses to register the transfer of any
shares or debentures, the company shall, within one month from the date on which the instrument of
transfer was lodged with the company, send to the transferee and the transferor notice of the refusal'
[sec.38(a)]. Failure to do so may lead to legal complications. The act provides heavy fine as punitive
measures- Taka one hundred for every day during which the default continues [sec.38(5)]. The
signature of the transferor on the transfer instrument is vital and is the only source of checking the
genuineness of the intention of transfer. lt is, as such, the duty of the Company Secretary to compare
the signature of the transferor with his admitted signature kept in the office. For this purpose, specimen
signatures of all shareholders should be called for and preserved in a separate card index in alphabetic
order. The Secretary still cannot shrug off his responsibility in the event of fraudulent transfer.

It is therefore, goodas a practice to notify both the parties after endorsement of each transfer if,
however, the volume is not too large.

The formalities for transfer of debentures are somewhat the same except that those are to be recorded
in separate registers.

40. TRANSMTSSTON OF SHARES / DEBENTURES

Transfer of shares through sale or otherwise is a voluntary act of the transferor or the transferee. But
transmission of shares is an involuntary act resulting from the operation of law due to death or
insolvency of a shareholder. The owner of shares of a deceased member, in such a case, vests in his
heirs or legal representative. A succession certificate from the court of competent authority is the legal
requirement in case of transmission of shares. However, the documentary entries are the same for
transfer or transmission of shares in the books of the company.

4L. CORPORATE DISCLOSURE POLICY

Disclosure policy of publicly traded companies is of great concern to the stakeholders in general and to
the stockholders in particular. Because, in such companies, there is a separation of ownership from
control. Therefore, the Exchange consider that the conduct of a fair and orderly market requires, every
listed company to make available to the public information necessary to informed investing; and to take
reasonable steps to ensure that all who invest in its securities enjoy equal access to such information. ln
applying this fundamental principle, the Stock Exchange has adopted the following specific policies
concerning disclosure (Regulation - 43):
1,. lmmediate Public Disclosure of Material lnformation
2. Thorough Public Dissemination
3. Clarification or Confirmation of Rumours and Reports
4. Response to Unusual Market Action
5. UnwarrantedPromotionalDisclosure
6. lnsider Trading
7. Buy/ Sell of Shares by Sponsors

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4L.L IMMEDIATE PUBLIC DISCLOSURE OF MATERIAL INFORMATION

Material information refers to the information relevant to the interest of the stockholders. A listed
company is required to release material information to the public in a manner designed to obtain its
fullest posslble public dissemination.

41.L.t Standards to be employed to determine whether disclosure should be made:

lmmediate disclosure should be made of information about a company's affairs or about events or
conditions in market for the company's securities which meets either of the following standards:
(a) Where the information is likely to have a significant effect on the price of any of the
company's securities, or
(b) Where such information (after any necessary interpretation by securities analysts or
other experts) is likely to be considered important, by a reasonable investor in
determining his choice of action

41.L.2 lnformation to be disclosed

Any material information of a factual nature that has a bearing on the value of a company's
securities or on investor decisions as to whether or not to invest or trade in such securities should
be disclosed. Such information include information concerning the company's property, business
financial conditions and prospects, mergers and acquisitions and dealings with employees,
suppliers, customers and others as well as information concerning a slgnificant change in
ownership of the company's securities owned by insiders or representing control of the company.

The Exchange does not normally consider disclosure of a company's internal estimates or
projections of its earnings or of other data relating to its affairs to be necessary. lf such estimates
or projections are released, they should be prepared carefully, on a reasonable factual basis, and
should be stated realistically, with appropriate qualifications. Moreover, if such estimates or
projections subsequently appear to have been mistaken, they should be promptly and publicly
corrected.

4L.1.3 Events and conditions in the market that may require disclosure:

The price of a company's securities, as well as a reasonable investor's decision whether to buy or
sell those securities, may be affected as much by factors directly concerning the market for the
securities as by factors concerning the company's business. Factors directly concerning the market
for a company's securities, or events materially affecting the size of the "public issue" of its
secu rities.

While, as is noted above; a company is expected to make appropriate disclosure about significant
change in insider ownership of its securities, the company should not indiscriminately disclose
publicly any knowledge it has of the trading activities of outsiders, such as trading by unit trusts or
other institutions, for such outsiders normally have a legitimate interest in preserving the
confidentiality of their securities transactions.

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 Corporate Luws and Practices

4L.1.4 Examples of a company's affairs or market conditions typically requiring disclosure:

The following events, while not comprising a complete list of all the situations which may require
disclosure are particularly likely to require prompt announcements:

(a) A joint venture, mergers, acquisitions or takeovers.

(b) The declaration or omission of dividends or the determination of earnings.
(c) The acquisition or loss of a significant contract.
(d) A significant new product or discovery.

(e) A change in control or a significant change in management.

(f) A call of securities for redemption.

(e) The borrowing of a significant amount of funds.

(h) The public or private sale of significant amount of additional securities.
(i) Significant litigation.

U) The purchase or sale of a significant assets.

(k) A significant change in capital investment plans.

(1) A significant labor dispute with sub-contractors or suppliers.

(m) A tender offer for another company's securities.

(n) An event of default on interest and/or principal payment in respect of loans

41.L.5 Withholdinginformation

Occasionally, circumstances arise in which provided that complete confidentiality is maintained a

company may temporarily refrain from publicly disclosing material information. The following
circumstances where disclosures can be withheld are limited and constitute an infrequent
exception to the normal requirement of immediate public disclosure. Thus, in cases of doubt the
presumption must always be in favor of disclosure:
(a) When immediate disclosure would prejudice the ability of the company to pursue its
corporate objectives.

Although public disclosure is generally necessary to protect the interest of investors,

circumstances may occasionally arise where disclosure would prejudice a company's ability to
achieve a valid corporate objective, public disclosure of plan to acquire certain real estate for
example, could result in an increase in the company cost of the desired acquisition or could
prevent the company from carrying out the plan at all. ln such circumstances, if the unfavorable
result to the company outweighs the undesirable consequences of non-disclosure, disclosure may
properly be deferred to a more appropriate time.

(b) When the facts are in a state of flux and a more appropriate moment for disclosure is
imminent.

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 Corporate Laws and Practices

Occasionally corporate developments give rise to information which, although material, is subject
to rapid change. lf the situation is about to stabilize or resolve itself in the near future, it may be
proper to withhold public announcements concerning the same subject but based on changing
facts may confuse or mislead the public rather than enlighten it.

ln the course of a successful negotiation for the acquisltion of another company, for example, the
only information known to each party at the outset may be the willingness of the other to hold
discussions. Shortly thereafter it may become apparent to the parties that it is likely an agreement
can be reached. Finally, agreement in principle may be reached on specific terms. ln such
circumstances a company need not issue a public announcement at each stage of constantly
changing facts but may await agreement in principle on specific terms. lf, on the other hand,
progress in the negotiations should stabilize at some other point, disclosure should then be made
if the information is material.

Whenever the material information is being temporarily withheld, the strictest confidentiality
must be maintained, and the company should be prepared to make an immediate public
announcement, if necessary. During this period, the market action of the company's securities
should be closely watched, since unusual market activity frequently signifies that a ,,leak,, may
have occurred. Company or securities laws may restrict the extent of permissible disclosures
before or during a public offering of securities or a solicitation of proxies.

4L.1.6 Action required if insider trading occurs while material information is being
temporarily withheld:

lmmediate public disclosure of the information in question must be effected if the Company
should learn that insider trading, has taken or is taking place. ln unusual cases, where the trading
is insignificant and does not have any influence on the market measures sufficient to halt the
insider trading and prevent its recurrence are taken exceptions might be made which should
be
discussed with the Exchange. The Exchange listing department can provide current information
regarding market activity in the Company's securities with which to help assess the significance
of
such trading.

4t.L.7 Maintaining confidentiality:

lnformation that is to be kept confidential should be confined, to the extent possible to the
highest possible echelons of management and should be disclosed to officers, employees and
others on a need to know basis only. Distribution of paper work and other data should be held to
a minimum. Where the information must be disclosed more broadly to company personnel or
others their attention should be drawn to its confidential nature and to the restrictions that
apply
to its use, including the prohibitions of insider trading,

It may be appropriate to require each person who gains access to the information to report any
transactions which affects in the company's securities to the Company. lf company,s accountants
or financial or public relations advisers or other outsiders are consulted, steps should be taken
to
ensure that they maintain similar precautions within their respective organizations to maintain
confidentia lity.

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41.2 THOROUGH PUBLIC DISSEMINATION

A listed company is required to release material information to the public in a manner designed to
obtain its fullest possible public dissemination.

41.2.1 Disclosure techniques to be employed by a company:

The steps required are as follows:

(a) Disclosure of material information can often be made after the market closes.
Otherwise, when it is necessary to make disclosure of material information before or
during trading hours, the Exchange expects a company to notify the Exchange in
advance of such disclosure if the material information is of a non-routine nature or is
expected to have a substantial impact on the market for the securities of the company.
The Exchange with the benefit of all the facts provided by the company will be able to
consider a temporary halt in trading pending an announcement would be desirable on
the company or its securities, but provides an opportunity for disseminating and
evaluating the information released.

Such a step frequently helps avoid rumours and market instability as well as the unfairness to
investors that may arise when material information has reached part but not yet all of the
investing community. Thus in appropriate circumstances, the Exchange can often provide a
valuable service to investors and listed companies by arranging for such a halt.

(b) At time of Public Disclosure: As a minimum, any public disclosure of material informa-
tion should be made by an announcement released simultaneously to be business and
financial news media the Chittagong Stock Exchange.
Companies may also wish to broaden their distribution to other news or broadcast media such as
those in the location of the company's plants or offices and to trade publications. The information
in question should always be given to the media in such way as to promote publication by them as
promptly as possible i.e. telephone or in writing by hand delivery in both cases on an immediate
release basis. Companies are cautioned that some of these media may refuse to publish
information given by telephone until it has been confirmed in writing or may require written
confirmation after its publication.
Forty copies or such other number as the Exchange may determine of all public announcements
should be sent to the Exchange.

4L.2.2 Application of the policy on thorough public dissemination to meeting with securities
analysts, journalists, stockholders and others:

The Exchange recommends that companies observe an open door policy in dealing with analysis of
journalist, stockholders and others. However, under no circumstances, should disclosure of
material corporate developments be made on an individual or selective basis to analysts,
stockholders or other persons unless such information has previously been fully disclosed and
disseminated to the public. ln the event that material information is inadvertently disclosed on the
occasion of any meetings with analysts or others, it must be publicly disseminated as promptly as
possible by the means described above.

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 Corporate Luws and Practices

The exchange also believes that even any appearance of preference or partiality in the release of
explanation or information should be avoided. Thus meeting with analysts or other special groups
where the procedure of the group sponsoring the meetings permits representatives of the news
and other media should be permitted to attend any such meeting.

41.3 CLARIFICATION OR CONFIRMATION OF RUMOURS AND REPORTS

Whenever a listed company becomes, or is made aware of a rumour or report true or false, that
contains information that is likely to have, or has had an effect on the trading in the Company's
securities or would be likely to have a bearing on investment decisions, the company is required to
publicly clarify the rumour reports as promptly as reports as possible.

41.3.7 Rumours and reports to be clarified or confirmed

A public circulation by any means whether by an article published in a newspaper, by a brokers

market letter or by word of mouth information either correct or false which has not been
substantiated by the company and which is likely to have or has had an effect on the price of the
company securities or would be likely to have a bearing on investment decision must be clarified
or confirmed.

4L.3.2 Response to be made to rumours or reports:

ln the case of material rumour or report, containing erroneous information which has been circu-
lated the company should prepare an announcement denying the rumour or report and setting
forth facts sufficient to clarify any misleading aspect of the rumour. ln the case of a material
rumour or report containing information that is correct an announcement setting forth the facts
should be prepared for public. ln addition in the case of false rumour or report a reasonable effort
should be made to bring the announcement to the attention of the particular group that initially
distributed it. ln the case of an erroneous newspaper article for example by sending a copy of the
announcement to the newspapers, financial editor or in the case of an erroneous market letter by
sending a copy to the broker responsible for the letter.

ln the case of rumour or report predicting future sales earning or other data no response from the
company is ordinarily required. However if such a report is manifestly based on erroneous
information or is wrongly to the supposedly factual source the company should respond promptly
to the supposedly factual elements of the rumour of a supposedly factual nature. Moreover if a
rumour or report contains a prediction that is clearly erroneous that company should ensure an
announcement to the effect that company itself has made no such predictions and currently
knows of no facts that would justify making such prediction.

41.4 RESPONSE TO UNUSUAL MARKET ACTION

Whenever unusual market action takes place in a listed company's securities, the company is expected
to make inquiry to determine whenever rumors or other conditions requiring corrective action exits, and
if so, to take, whatever action is appropriate. lf, after the company's review, the unusual market action
remains unexplained it may be appropriate for the company to announce that there has been no
material development in its business and affairs not previously disclosed to its knowledge, nor any other
reason to account for the unusual market action.

l09 lillag*
 Corporate Laws und Practices

41.4.1 Significance of unusual market activity:

Where unusual market action, in price movement, trading activity or both occurs without any
apparent publicly available information which would account for the action, it may signify trading
by persons who are acting either on unannounced information or on a rumour or report whether
true or false about the company . Most often, of course, unusual market activity may not be trace-
able either to insider trading or to rumor or report. Nevertheless the market action itself may be
misleading to investors who are likely to assume that a sudden and appreciable change in the
price of a company's stock must reflect a parallel change in its business or prospects similarly
unusual trading volume even when not accompanied by a significant change in price tenders to
encourage rumors and give rise to excessively speculative trading which may be unrelated to
actual development in the affairs.

41.4.2 Response required of a company when unusual market action in its securities takes
place:

(A) First the company should attempt to determine the reason for the market action by
considering in particular (a) whether any information about its affairs which would
account for the action has recently been publicly disclosed, (b) whether there is any
information of this type that has not been publicly disclosed in which case the unusual
market action may signify that a leak has occurred and (c) whetherthe company is the
subject of rumour or report.

lf the company determines that the market action results from material information that has
already been publicly disseminated generally no further announcement is required. Although if
the market action indicates that such information may have been misinterpreted it may be helpful
after discussion with the Exchange to issue a clarifying announcement.
lf the market action results from the leak of previously undisclosed information, the information in
question must promptly be disseminated. lf the market results from a false rumor or report, the
Exchange policy on correction of such rumors and report should be complied with. Finally, if the
company is unable to determine the cause of the market action, The Exchange may suggest that
the company a public announcement to the effect that there have been no undisclosed recent
developments affecting the company or its affairs which would account for the unusual market
activity

41.5 UNWARRANTED PROMOTIONAL DISCLOSURE

A listed Company should refrain from promotional disclosure activity which exceeds what is necessary to
enable the public to make informed investment decisions. Such activity includes inappropriately worded
news release, public announcements not justified by actual development in a company's affairs,
exaggerated reports or predictions, flamboyant wording and other forms of overstated or overzealous
disclosure activity which may mislead inventors and cause unwarranted price movements and activity in
a company's securities.

41.5.1 Unwarranted promotional disclosure activity:

Disclosure activity beyond that necessary to inform investor and explicably essential as
an attempt to influence securities' prices, is considered to be unwarranted and
promotional. Although the distinction between legitimate public relation activities and
such promotional activity is one that must necessarily be drawn from the facts of a
particular case the following are frequent instances of promotional activity:

110 lll'n;:*
 Corporate Laws and Practices

(a) A series of public announcements unrelated in volume or frequency to the materiality of

actual developments in a company's business and affairs.
(b) Premature announcements of products still in the developments stage with unproven
commercial prospects.
(c) Promotion and expense-paid trips or the seeking out of meetings or interviews with
analysts and financial writers which could have the effect of unduly influencing the
market activity in the company's securities and are not justified in frequency or scope
by, the need to disseminate information about actual developments in the company's
business and affairs.
(d) Press release or other public announcement of a one-sided or unbalanced nature.
(e) Company's or product advertisement which in effect promotes the company's
secu rities.

41.6 INSIDER TRADING

lnsiders should not trade on the basis of material information which is not known to the investing
public. Moreover, insiders should refrain from trading, even, after material information has been
released to the press and other media , for a period at least 5 marked days to permit through public
dissemination and evaluation of the information.

4L.6.L lnsiders
lnsiders are all persons who come into possession to material information, before its
public release is considered. Such persons include controlling shareholders, directors,
officers and employees and frequently also include outside attorneys accountants,
investment bankers, public relation advisers, advertising agencies, consultants and other
independent contractors. The husbands, wives, immediate families and those under the
control of insiders may also be regarded as insiders. Where acquisition or other
negotiations are concerned, the above relationships apply to the other parties to the
negotiations as well. Finally, for purpose of the Exchange disclosure policy, insiders include
tepees who come into possession of material inside information.

41.6.2 !nsiderinformation:
lnsider information is that which has not been publicly released and which is intended
for use solely for a corporate purpose and not for any personal use and which the
company withholds.

41.6.3 lnsider trading:

lnsider Trading refers not only to the purchase or sale of a company's securities but also
to the purchase or sale of options with respect to such securities. Such trading is
deemed to be done by an insider whenever he has any beneficial interest, direct or
indirect in such securities or options regardless of whether they are actually held in his
name.

lncluded in the concept of insider trading is tipping, or revealing inside information to

outside individuals to enable such individuals to trade in the company securities on the
basis of undisclosed information.

lllll)*6*
 Corporate Laws and Pructices

4L.6.4 How soon after the release of material information any insiders begin to trade?

This depends both on how thoroughly and how quickly after its release the information
is published by the news media services and the press. ln addition, following
dissemination of the information, insider should refrain from trading until the public has
had an opportunity to evaluate it thoroughly. Where the effect of the information on
investment decisions is readily understandable, as in the case on earnings, the required
waiting period will be shorter than where the information must be interpreted before
its bearing on investment decisions can be evaluated. While the waiting period is
dependent on the circumstances, the Exchange recommends that, as a basic policy,
when dissemination is made in accordance with Exchange policy insiders should wait for
at least twenty-four hours after the general publication of the release in news media.

41.6.5 Steps can be taken to prevent insider trading:

Companies can establish, publish, and enforce effective procedures applicable to

purchase and sale of its securities by officers, directors, employees and other insiders
designed not only to prevent improper trading but also to avoid any question of the
propriety of insider purchases or sales. One such procedure might require corporate
insiders to restrict their purchases and sale of the company's securities with following
the release of the annual statements, or other releases setting forth the financial
condition and status of the company. Another could involve the purchase of a
company's securities on a regular periodic basis by an agent over which neither the
company nor the individual has any control.

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Corporate Governance Code

Notification dated 3 June 2018

No. BSEC/CMRRCD/2006-1,58/2OTlAdmin/SO:Whereas, the

Bangladesh Securities and Exchange
Commission (hereinafter referred to as the "Commission") deems it fit that the consent already
accorded by the Commission, or deemed to have been accorded by it, or to be accorded by it in future,
to the issue of capital by the companies listed with any stock exchange in Bangladesh, shall be subject to
certain further conditions, i.e., Corporate Governance Code in order to enhance corporate governance
in the interest of investors and the capital market;

Now, therefore, in exercise of the power conferred by section 2CC of the Securities and Exchange
Ordinance, 1969 (XVll of 1969), the Commission hereby repeals its earlier Notification No.
SEC/CMRRCD/2006-158|LZ+/Adminl44 dated 07 August 2012, published in the official gazette on 30
August 201.2 and the relevant Notification(s) on the same matter and, imposes the following further
conditions, i.e., Corporate Governance Code to the consent already accorded by it, or deemed to have
been accorded by it, or to be accorded by it in future, to the issue of capital by the companies listed with
any stock exchange in Bangladesh:

Provided, however, that these conditions or Code are imposed on 'comply' basis; the companies listed
with any stock exchange in Bangladesh shall comply with these conditions or Code in accordance with
the condition No. 9.

The Conditions, i.e., Corporate Governance Code:

1. Board of Directors. -
(1) Size of the Board of Directors
The total number of members of a company's Board of Directors (hereinafter referred to as "Board")
shall not be less than 5 (five) and more than 20 (twenty).

(2\ lndependent Directors

All companies shall have effective representation of independent directors on their Boards, so that the
Board, as a group, includes core competencies considered relevant in the context of each company; for
this purpose, the companies shall comply with the following: -

a) At least one-fifth (1/5) of the total number of directors in the company's Board shall be
independent directors; any fraction shall be considered to the next integer or whole number for
calculating number of independent director(s);

b) For the purpose of this clause "independent director" means a director-

(i) who either does not hold any share in the company or holds less than one percent (1%) shares
of the total paid-up shares of the company;

(ii) who is not a sponsor of the company or is not connected with the company's any sponsor or
director or nominated director or shareholder of the company or any of its associates, sister
concerns, subsidiaries and parents or holding entities who holds one percent (l%) or more

113 l lr * S *
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shares of the total paid-up shares of the company on the basis of family relationship and his or
herfamily members also shall not hold above mentioned shares in the company:
Provided that spouse, son, daughter, father, mother, brother, sister, son-in-law and daughter-in-
law shall be considered as family members;

(iii) who has not been an executive of the company in immediately preceding 2 (two)financialyears;

(iv) who does not have any other relationship, whether pecuniary or otherwise, with the company
or its subsidiary or associated companies;

(v) who is not a member or TREC (Trading Right Entitlement Certificate) holder, director or officer
of any stock exchange;

(vi) who is not a shareholder, director excepting independent director or officer of any member or
TREC holder of stock exchange or an intermediary of the capital market;

(vii) who is not a partner or an executive or was not a partner or an executive during the preceding 3
(three) years of the concerned company's statutory audit firm or audit firm engaged in internal
audit services or audit firm conducting special audit or professional certifying compliance of this
Code;

(viii)who is not independent director in more than 5 (five) listed companies;

(ix) who has not been convicted by a court of competent jurisdiction as a defaulter in payment of
any loan or any advance to a bank or a Non-Bank Financial lnstitution (NBFI); and

(x) who has not been convicted for a criminal offence involving moral turpitude;

c) The independent director(s) shall be appointed by the Board and approved by the shareholders in
the Annual General Meeting (AGM);

d) The post of independent director(s) cannot remain vacant for more than 90 (ninety) days; and

e) The tenure of office of an independent director shall be for a period of 3 (three) years, which may
be extended for 1 (one)tenure only:

Provided that a former independent director may be considered for reappointment for another
tenure after a time gap of one tenure, i.e., three years from his or her completion of consecutive
two tenures [i.e. six years]:

Provided further that the independent director shall not be subject to retirement by rotation as
per the Companies Act, 1994,

Explanation: For the purpose of counting tenure or term of independent director, any partial term
of tenure shall be deemed to be a fulltenure.

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 Corporate Laws and Practices

(31 Qualification of lndependent Director. -

1. lndependent director shall be a knowledgeable individual with integrity who is able to ensure
compliance with financial laws, regulatory requirements and corporate laws and can make
meaningful contribution to the business;

2. lndependent director shall have following qualifications:

(a) Business Leader who is or was a promoter or director of an unlisted company having
minimum paid-up capital of Tk. 100.00 million or any listed company or a member of any
national or international chamber of commerce or business association; or

(b) Corporate Leader who is or was a top level executive not lower than Chief Executive Officer
or Managing Director or Deputy Managing Director or Chief Financial Officer or Head of
Finance or Accounts or Company Secretary or Head of lnternal Audit and Compliance or Head
of Legal Service or a candidate with equivalent position of an unlisted company having
minimum paid up capital of Tk. 100.00 million or of a listed company; or

Explanation: Top level executive includes Managing Director (MD) or Chief Executive Officer
(CEO), Additional or Deputy Managing Director (AMD or DMD), Chief Operating Officer
(COO), Chief Financial Officer (CFO), Company Secretary (CS), Head of lnternal Audit and
Compliance (HIAC), Head of Administration and Human Resources or equivalent positions
and same level or ranked or salaried officials of the company.

(c) Former official of government or statutory or autonomous or regulatory body in the position
not below 5th Grade of the national pay scale, who has at least educational background of
bachelor degree in economics or commerce or business or law; or

(d) University Teacher who has educational background in Economics or Commerce or Business
Studies or Law; or

(e) Professional who is or was an advocate practicing at least in the High Court Division of
Bangladesh Supreme Court or a Chartered Accountant or Cost and Management Accountant
or Chartered Financial Analyst or Chartered Certified Accountant or Certified Public
Accountant or Chartered Management Accountant or Chartered Secretary or equivalent
qualification;

3. The independent director shall have at least 10 (ten) years of experiences in any field mentioned
in clause (b);

4. ln special cases, the above qualifications or experiences may be relaxed subject to prior approval
of the Commission.

(4) Duality of Chairperson of the Board of Directors and Managing Director or Chief Executive
Officer:

(1) The positions of the Chairperson of the Board and the Managing Director (MD) and/or
Chief Executive Officer (CEO) of the company shall be filled by different individuals;

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 Corporate Luws and Practices

(2) The Managing Director (MD) and/or Chief Executive Officer (CEO) of a listed company shall
not hold the same position in another listed company;

(3) The Chairperson of the Board shall be elected from among the non-executive directors of
the company;

(4) The Board shall clearly define respective roles and responsibilities of the Chairperson and
the Managing Director and/or Chief Executive Officer;

(5) ln the absence of the Chairperson of the Board, the remaining members may elect one of
themselves from non-executive directors as Chairperson for that particular Board's
meeting; the reason of absence of the regular Chairperson shall be duly recorded in the
minutes.

(5) The Directors' Report to Shareholders

The Board of the company shall include the following additional statements or disclosures in the
Directors' Report prepared under section 184 of the Companies Act, 1994 (Act No. XVlll of 1994):-

(i) An industry outlook and possible future developments in the industry;

[ii) The segment-wise or product-wise performance;

(iii) Risks and concerns including internal and external risk factors, threat to sustainability and
negative impact on environment, if any;

[iv) A discussion on Cost of Goods sold, Gross Profit Margin and Net Profit Margin, where applicable;

(vl A discussion on continuity of any extraordinary activities and their implications (gain or loss);

fviJ A detailed discussion on related party transactions along with a statement showing amount,
nature of related party, nature of transactions and basis of transactions of all related party
transactions;

(vii) A statement of utilization of proceeds raised through public issues, rights issues and/or any
other instruments;

fviii) An explanation if the financial results deteriorate after the company goes for lnitial Public
Offering (lPO), Repeat Public Offering (RPO), Rights share Offer, Direct Listing, etc.;

(ix) An explanation on any significant variance that occurs between Quarterly Financial
performances and Annual Financial Statements;

(xl A statement of remuneration paid to the directors including independent directors;

(xi) A statement that the financial statements prepared by the management of the issuer company
present fairly its state of affairs, the result of its operations, cash flows and changes in equity;

116 1F:rg*
 Corporate Laws and Pructices

(xiiJ A statement that proper books of account of the issuer company have been maintained;

[xiii) A statement that appropriate accounting policies have been consistently applied in preparation
of the financial statements and that the accounting estimates are based on reasonable and
prudent judgment;

(xiv) A statement that lnternational Accounting Standards (lAS) or lnternational Financial Reporting
Standards (IFRS), as applicable in Bangladesh, have been followed in preparation of the financial
statements and any departure there from has been adequately disclosed;

[xv) A statement that the system of internal control is sound in design and has been effectively
implemented and monitored;

[xvi) A statement that minority shareholders have been protected from abusive actions by, or in the
interest of, controlling shareholders acting either directly or indirectly and have effective means
of redress;

[xviiJ A statement that there is no significant doubt upon the issuer company's ability to continue as a
going concern, if the issuer company is not considered to be a going concern, the fact along with
reasons there of shall be disclosed;

[xviii) An explanation that significant deviations from the last year's operating results of the issuer
company shall be highlighted and the reasons thereof shall be explained;

[xix) A statement where key operating and financial data of at least preceding 5 (five) years shall be
summarized;

(xx) An explanation on the reasons if the issuer company has not declared dividend (cash or stock)
for the year;

[xxi) Board's statement to the effect that no bonus shares or stock dividend has been or shall be
declared as interim dividend;

fxxiiJ The total number of Board meetings held during the year and attendance by each director;

fxxiii) A report on the pattern of shareholding disclosing the aggregate number of shares (along with
name-wise details where stated below) held by: -

(i) Parent or Subsidiary or Associated Companies and other related parties (name-wise
details);

(ii) Directors, Chief Executive Officer, Company Secretary, Chief Financial Officer, Head of
lnternal Audit and Compliance and their spouses and minor children (name-wise details);

(i ii) Executives; and

(lv) Shareholders holding ten percent (10%) or more voting interest in the company (name-
wise details);

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 Corporate Laws and Practices

Explanation: For the purpose of this clause, the expression "executive" means top 5 (five)
salaried employees of the company, other than the Directors, Chief Executive Officer, Company
Secretary, Chief Financial Officer and Head of lnternal Audit and Compliance.

fxxiv) ln case of the appointment or reappointment of a director, a disclosure on the following

information to the shareholders: -

(i) brief resume of the director;

(ii) nature of his or her expertise in specific functional areas;

(iii) names of companies in which the person also holds the directorship and the membership
of committees of the Board;
(iv) A Management's Discussion and Analysis

(v) signed by CEO or MD presenting detailed analysis of the company's position and
operations along with a brief discussion of changes in the financial statements, among
others, focusing on:

(vi) accounting policies and estimation for preparation of financial statements;

(vii) changes in accounting policies and estimation, if any, clearly describing the effect on
financial performance or results and financial position as well as cash flows in absolute
figure for such changes;

(viii) comparative analysis (including effects of inflation) of financial performance or results and
financial position as well as cash flows for current financial year with immediate preceding
five years explaining reasons thereof;

(ix) compare such financial performance or results and financial position as well as cash flows
with the peer industry scenario;

(x) briefly explain the financial and economic scenario of the country and the globe;

(xi) risks and concerns issues related to the financial statements, explaining such risk and
concerns mitigation plan of the company; and

(xii) future plan or projection or forecast for company's operation, performance and financial
position, with justification thereof, i.e., actual position shall be explained to the
shareholders in the next AGM;

(xiii) Declaration or certification by the CEO and the CFO to the Board as required under
condition No. 3(3) shall be disclosed as per Annexure-A; and

(xiv) fhe report as well as certificate regarding compliance of conditions of this Code as
required under condition No, 9 shall be disclosed as per Annexure-B and Annexure-C.

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 Corporate Laws and Ptsctices

(6) Meetings of the Board of Directors

The company shall conduct its Board meetings and record the minutes of the meetings as well as keep
required books and records in line with the provisions of the relevant Bangladesh Secretarial Standards
(BSS) as adopted by the lnstitute of Chartered Secretaries of Bangladesh (ICSB) in so far as those
standards are not inconsistent with any condition of this Code.

(ll Code of Conduct for the Chairperson, other Board members and Chief Executive Officer

(a) The Board shall lay down a code of conduct, based on the recommendation of the Nomination
and Remuneration Committee (NRC)at condition No.6, forthe Chairperson of the Board, other
board members and Chief Executive Officer of the company;

(b) The code of conduct as determined by the NRC shall be posted on the website of the company
including, among others, prudent conduct and behavior; confidentiality; conflict of interesU
compliance with laws, rules and regulations; prohibition of insider trading; relationship with
environment, employees, customers and suppliers; and independency'

5. Governance of Board of Directors of Subsidiary Company. -

a) Provisions relating to the composition of the Board of the holding company shall be made
applicable to the composition of the Board of the subsidiary company;

b) At least 1 (one) independent director on the Board of the holding company shall be a director on
the Board of the subsidiary company;

c) The minutes of the Board meeting of the subsidiary company shall be placed for review at the
following Board meeting of the holding company;

d) The minutes of the respective Board meeting of the holding company shall state that they have
reviewed the affairs of the subsidiary company also;

e) The Audit Committee of the holding company shall also review the financial statements, in
particular the investments made by the subsidiary company.

6 Managing Director (MD) or Chief Executive Officer (CEO), Chief Financial Officer (CFO), Head of
lnternal Audit and Compliance (HIAC) and Company Secretary (CS).-

(1) Appointment:

(a) The Board shall appoint a Managing Director (MD) or Chief Executive Officer (CEO), a
Company Secretary (CS), a Chief Financial Officer (CFO) and a Head of lnternal Audit and
Compliance (HIAC);

119lPagc
 Corporate Laws and Practices

(b) The positions of the Managing Director (MD) or Chief Executive Officer (CEO), Company
Secretary (CS), Chief Financial Officer (CFO) and Head of lnternal Audit and Compliance
(HIAC) shall be filled by different individuals;

(c) The MD or CEO, CS, CFO and HIAC of a listed company shall not hold any executive position
in any other company at the same time;

(d) The Board shall clearly define respective roles, responsibilities and duties of the CFO, the
HIAC and the CS;

(e) The MD or CEO, CS, CFO and HIAC shall not be removed from their position without
approval of the Board as well as immediate dissemination to the Commission and stock
exchange(s).

(2) Requirement to attend Board of Directors' Meetings

The MD or CEO, CS, CFO and HIAC of the company shall attend the meetings of the Board

Provided that the CS, CFO and/or the HIAC shall not attend such part of a meeting of the Board
which involves consideration of an agenda item relating to their personal matters.

(3) Duties of Managing Director (MD) or Chief Executive Officer (CEO) and Chief Financial Officer
(cFo)

a) The MD or CEO and CFO shall certify to the Board that they have reviewed financial statements
for the year and that to the best of their knowledge and belief:

i) these statements do not contain any materially untrue statement or omit any material fact or
contain statements that might be misleading; and

ii) these statements together present a true and fair view of the company's affairs and are in
compliance with existing accounting standards and applicable laws;

b) The MD or CEO and CFO shall also certify that there are, to the best of knowledge and belief, no
transactions entered into by the company during the year which are fraudulent, illegal or in
violation of the code of conduct for the company's Board or its members;

c) The certification of the MD or CEO and CFO shall be disclosed in the Annual Report

7. Board of Directors' Committee. -

For ensuring good governance in the company, the Board shall have at least following sub-
committees

i) Audit Committee; and

ii) Nomination and Remuneration Committee.

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 Corporute Laws and Practices

8. Audit Committee. -

(1) Responsibility to the Board of Directors:

a) The company shall have an Audit Committee as a sub-committee of the Board;

b) The Audit Committee shall assist the Board in ensuring that the financial statements reflect
true and fair view of the state of affairs of the company and in ensuring a good monitoring
system within the business;

c) The Audit Committee shall be responsible to the Board; the duties of the Audit Committee
shall be clearly set forth in writing.

(21 Constitution of the Audit Committee

a) The Audit Committee shall be composed of at least 3 (three) members;

b) The Board shall appoint members of the Audit Committee who shall be nonexecutive
directors of the company excepting Chairperson of the Board and shall include at least 1
(one) independent director;

c) All members of the audit committee should be "financially literate" and at least 1 (one)
member shall have accounting or related financial management background and 10 (ten)
years of such experience;

Explanation: The term "financially literate" means the ability to read and understand the
financial statements like statement of financial position, statement of comprehensive income,
statement of changes in equity and cash flows statement and a person will be considered to
have accounting or related financial management expertise if he or she possesses professional
qualification or Accounting or Finance graduate with at least 10 (ten) years of corporate
management or professional experiences,

d) When the term of service of any Committee member expires or there is any circumstance
causing any Committee member to be unable to hold office before expiration of the term of
service, thus making the number of the Committee members to be lower than the
prescribed number of 3 (three) persons, the Board shall appoint the new Committee
member to fill up the vacancy immediately or not later than 1 (one) month from the date of
vacancy in the Committee to ensure continuity of the performance of work of the Audit
Committee;

e) The company secretary shall act as the secretary of the Committee;

f) The quorum of the Audit Committee meeting shall not constitute without at least 1 (one)
independent director.

(3) Chairperson of the Audit Committee:

(a) fhe Board shall select 1 (one) member of the Audit Committee to be Chairperson of the
Audit Committee, who shall be an independent director;

[b) tn the absence of the Chairperson of the Audit Committee, the remaining members may
elect one of themselves as Chairperson for that particular meeting, in that case there shall

121 lllag*
 Corporate Luws and Practices

be no problem of constituting a quorum as required under condition No. s(aXb) and the
reason of absence of the regular Chairperson shall be duly recorded in the minutes.

(c) Chairperson of the Audit Committee shall remain present in the Annual General Meeting
(AGM):

Provided that in absence of Chairperson of the Audit Committee, any other member from the
Audit Committee shall be selected to be present in the annual general meeting (AGM) and
reason for absence of the Chairperson of the Audit Committee shall be recorded in the minutes
of the AGM.

(4) Meeting of the Audit Committee

(a) fne Audit Committee shall conduct at least its four meetings in a financial year:

Provided that any emergency meeting in addition to regular meeting may be convened at the
request of any one of the members of the Committee;
(b) The quorum of the meeting of the Audit Committee shall be constituted in presence of either
two members or two third of the members of the Audit Committee, whichever is higher,
where presence of an independent director is a must.

(5) Role of Audit Committee:

The Audit Committee shall: -

(a) Oversee the financial reporting process;

(b) monitor choice of accounting policies and principles;

(c) monitor lnternal Audit and Compliance process to ensure that it is adequately
resourced, including approval of the lnternal Audit and Compliance Plan and review of
the lnternalAudit and Compliance Report;
(d) oversee hiring and performance of external auditors;
(e) hold meeting with the external or statutory auditors for review of the annual financial
statements before submission to the Board for approval or adoption;
(f) review along with the management, the annual financial statements before submission
to the Board for approval;
(S) review along with the management, the quarterly and half yearly financial statements
before submission to the Board for approval;
(h) review the adequacy of internal audit function;
(i) review the Management's Discussion and Analysis before disclosing in the Annual
Report;

U) review statement of all related party transactions submitted by the management;

(k) review Management Letters or Letter of lnternal Control weakness issued by statutory
auditors;
(l) oversee the determination of audit fees based on scope and magnitude, level of
expertise deployed and time required for effective audit and evaluate the performance
of external auditors; and

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 Corporate Laws und Practices

(m) oversee whether the proceeds raised through lnitial Public Offering (lPO) or Repeat
Public Offering (RPO) or Rights Share Offer have been utilized as per the purposes stated
in relevant offer document or prospectus approved by the Commission:

Provided that the management shall disclose to the Audit Committee about the uses or
applications of the proceeds by major category (capital expenditure, sales and marketing
expenses, working capital, etc.), on a quarterly basis, as a part of their quarterly declaration of
financialresults:

Provided further that on an annual basis, the company shall prepare a statement of the
proceeds utilized for the purposes other than those stated in the offer document or prospectus
for publication in the Annual Report along with the comments of the Audit Committee.

(6) Reporting of the Audit Committee:

(a) Reporting to the Board of Directors

(i) The Audit Committee shall report on its activities to the Board.
(ii) The Audit Committee shall immediately report to the Board on the following findings, if
any: -

(a) report on conflicts of interests;

(b) suspected or presumed fraud or irregularity or material defect identified in the
internal audit and compliance process or in the financial statements;
(c) suspected infringement of laws, regulatory compliances including securities related
laws, rules and regulations; and
(d) any other matter which the Audit Committee deems necessary shall be disclosed to
the Board immediately;

(b) Reporting to the Authorities:

lf the Audit Committee has reported to the Board about anything which has material
impact on the financial condition and results of operation and has discussed with the
Board and the management that any rectification is necessary and if the Audit Committee
finds that such rectification has been unreasonably ignored, the Audit Committee shall
report such finding to the Commission, upon reporting of such matters to the Board for
three times or completion of a period of 6 (six) months from the date of first reporting to
the Board, whichever is earlier.

(7) Reporting to the Shareholders and General lnvestors

Report on activities carried out by the Audit Committee, including any report made to the
Board under condition No. 5(6)(a)(ii) above during the year, shall be signed by the
Chairperson of the Audit Committee and disclosed in the annual report of the issuer
company.

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9 Nomination and Remuneration Committee (NRC):

(1) Responsibility to the Board of Directors

(a) The company shall have a Nomination and Remuneration Committee (NRC) as a sub-
committee of the Board;

(b) The NRC shall assist the Board in formulation of the nomination criteria or policy for
determining qualifications, positive attributes, experiences and independence of
directors and top level executive as well as a policy for formal process of considering
remuneration of directors, top level executive;

(c) The Terms of Reference (TOR) of the NRC shall be clearly set forth in writing covering
the areas stated at the condition No. 6(5Xb).

(2) Constitution of the NRC

(a) The Committee shall comprise of at least three members including an independent
director;
(b) All members of the Committee shall be non-executive directors;
(c) Members of the Committee shall be nominated and appointed by the Board;
(d) The Board shall have authority to remove and appoint any member of the Committee;
(e) ln case of death, resignation, disqualification, or removal of any member of the
Committee or in any other cases of vacancies, the board shall fill the vacancy within 180
(one hundred eighty) days of occurring such vacancy in the Committee;

(f) The Chairperson of the Committee may appoint or co-opt any external expert and/or
member(s) of staff to the Committee as advisor who shall be non-voting member, if the
Chairperson feels that advice or suggestion from such external expert and/or member(s)
of staff shall be required or valuable for the Committee;
(g) The company secretary shall act as the secretary of the Committee;

(h) The quorum of the NRC meeting shall not constitute without attendance of at least an
independent director;

(i) No member of the NRC shall receive, either directly or indirectly, any remuneration for
any advisory or consultancy role or otherwise, other than Director's fees or honorarium
from the company.

(3) Chairperson of the NRC

(a) The Board shall select 1 (one) member of the NRC to be Chairperson of the Committee,
who shall be an independent director;
(b) ln the absence of the Chairperson of the NRC, the remaining members may elect one of
themselves as Chairperson for that particular meeting, the reason of absence of the
regular Chairperson shall be duly recorded in the minutes;
(c) The Chairperson of the NRC shall attend the annual general meeting (AGM) to answer
the queries of the shareholders:

124 1tr)*g*
 Corporate Laws and Practices

Provided that in absence of Chairperson of the NRC, any other member from the NRC shall be
selected to be present in the annual general meeting (AGM) for answering the shareholder's
queries and reason for absence of the Chairperson of the NRC shall be recorded in the minutes
of the AGM.

(4) Meeting of the NRC

(a) The NRC shall conduct at least one meeting in a financial year;

(b) The Chairperson of the NRC may convene any emergency meeting upon request by any
member of the wRC;
(c) The quorum of the meeting of the NRC shall be constituted in presence of either two
members or two third of the members of the Committee, whichever is higher, where
presence of an independent director is must as required under condition No, 6(2Xh);

(d) The proceedings of each meeting of the NRC shall duly be recorded in the minutes and
such minutes shall be confirmed in the next meeting of the NRC.

(5) Role of the NRC

(a) runC shall be independent and responsible or accountable to the Board and to the
shareholders;

(b) NRC shall oversee, among others, the following matters and make report with
recommendation to the Board:

i. formulating the ''criteria for determining qualifications, positive attributes and

independence of a director and recommend a policy to the Board, relating to the
remuneration of the directors, top level executive, considering the following:

(a) the level and composition of remuneration is reasonable and sufficient to attract,
retain and motivate suitable directors to run the company successfully;

(b) the relationship of remuneration to performance is clear and meets appropriate

performance benchmarks; and

(c) remuneration to directors, top level executive involves a balance between fixed and
incentive pay reflecting short and long-term performance objectives appropriate to
the working of the company and its goals;

devising a policy on Board's diversity taking into consideration age, gender,

experience, ethnicity, educational background and nationality;

iii identifying persons who are qualified to become directors and who may be
appointed in top level executive position in accordance with the criteria laid down,
and recommend their appointment and removal to the Board;

IV formulating the criteria for evaluation of performance of independent directors and

the Board;

125 1i);rg*
 Corporate Laws and Practices

identifying the company's needs for employees at different levels and determine
their selection, transfer or replacement and promotion criteria; and

VI developing, recommending and reviewing annually the company's human resources

and training policies;

(c) The company shall disclose the nomination and remuneration policy and the evaluation
criteria and activities of NRC during the year at a glance in its annual report.

10. External or Statutory Auditors. -

(1) The issuer company shall not engage its external or statutory auditors to perform the following
services of the company, namely:

(i) appraisal or valuation services or fairness opinions;

(ii) financial information systems design and implementation;
(iii) book-keeping or other services related to the accounting records or financial statements;
(iv) broker-dea ler services;
(v) actuarial services;
(vi) internal audit services or special audit services;
(vii) any service that the Audit Committee determines;
(viii) audit or certification services on compliance of corporate governance as required under
condition No. 9(1); and (ix) any other service that creates conflict of interest.

(2) No partner or employees of the external audit firms shall possess any share of the company they
audit at least during the tenure of their audit assignment of that company; his or her family
members also shall not hold any shares in the said company:

Provided that spouse, son, daughter, father, mother, brother, sister, son-in-law and daughter-in-law
shall be considered as family members.

(3) Representative of external or statutory auditors shall remain present in the Shareholders'
Meeting (Annual General Meeting or Extraordinary General Meeting) to answer the queries of
the shareholders.

Ll. Maintaining a website by the Company

(1) The company shall have an official website linked with the website of the stock exchange.
(2) The company shall keep the website functional from the date of listing.

(3) The company shall make available the detailed disclosures on its website as required under the
listing regulations of the concerned stock exchange(s).

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 Corporate Laws and Praetices

12. Reporting and Compliance of Corporate Governance. -

(1) The company shall obtain a certificate from a practicing Professional Accountant or Secretary
(Chartered Accountant or Cost and Management Accountant or Chartered Secretary) other
than its statutory auditors or audit firm on yearly basis regarding compliance of conditions of
Corporate Governance Code of the Commission and shall such certificate shall be disclosed in
the Annual Report.

Explanation: "Chartered Accountant" means Chartered Accountant as defined in the Bangladesh

Chartered Accountants Order, 1973 (President's Order No. 2 of 1973); "Cost and Management
Accountant" means Cost and Management Accountant as defined in the Cost and Management
Accountants Ordinance, 1977 (Ordinance No. Llll of 19771; "Chartered Secretary" means
Chartered Secretary as defined in the Chartered Secretaries Act, 2010.

(2) The professional who will provide the certificate on compliance of this Corporate Governance
Code shall be appointed by the shareholders in the annual general meeting.

(3) The directors of the company shall state, in accordance with the Annexure-C attached, in the
directors' report whether the company has complied with these conditions or not.

l2TlPage
 Corporate Laws snd Practices

Annexure-A

[As per condition No. l(sXxxvi)]

Name of the company

Declaration by CEO and CFO

Date:

The Board of Directors

Limited

Subject: Declaration on Financial Statements for the year ended on

Dear Sirs,

Pursuant to the condition No. 1(5Xxxvi) imposed vide the Commission's Notification No. Dated
under section 2CC of the Securities and Exchange Ordinance, 1969, we do hereby declare that:

(1) The Financial Statements of ............. Limited for the year ended on
............. have been prepared in compliance with lnternational Accounting
Standards (lAS) or lnternational Financial Reporting Standards (IFRS), as applicable in the
Bangladesh and any departure there from has been adequately disclosed;

(2) The estimates and judgments related to the financial statements were made on a prudent and
reasonable basis, in order for the financial statements to reveal a true and fair view;

(3) The form and substance of transactions and the Company's state of affairs have been
reasonably and fairly presented in its financial statements;

(4) To ensure above, the Company has taken proper and adequate care in installing a system of
internal control and maintenance of accounting records;

128 lll*g*
 Corporate Luws and Practices

(5) Our internal auditors have conducted periodic audits to provide reasonable assurance that the
established policies and procedures of the Company were consistently followed; and

(6) The management's use of the going concern basis of accounting in preparing the financial
statements is appropriate and there exists no material uncertainty related to events or
conditions that may cast significant doubt on the Company's ability to continue as a going
concern.

ln this regard, we also certify that: -

(i) We have reviewed the financial statements for the year ended on .and that to
the best of our knowledge and belief:

(a) these statements do not contain any materially untrue statement or omit any material fact or
contain statements that might be misleading;

(b) these statements collectively present true and fair view of the Company's affairs and are in
compliance with existing accounting standards and applicable laws.

(iii) ........... .... There are, to

the best of knowledge and belief, no transactions entered into by the Company during the year
which are fraudulent, illegal or in violation of the code of conduct for the company's Board of
Directors or its members.

Sincerely yours,

(Name and Signature with date)

fName and Signature with date) Chief
Chief Executive Officer (CEOJ Financial Officer [CFO)

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 Corporate Laws and Practices

Annexure-B

[Certificate as per condition No. 1(5Xxxvii)]

Report to the Shareholders of Limited on compliance on the Corporate

Governance Code

We have examined the compliance status to the Corporate Governance Code by

Limited for the year ended on............... This Code relates to the
Notification No............... dated ........ " of the Bangladesh Securities
and Exchange Commission.

Such compliance with the Corporate Governance Code is the responsibility of the Company' Our
examination was limited to the procedures and implementation thereof as adopted by the Management
in ensuring compliance to the conditions of the Corporate Governance Code'

This is a scrutiny and verification and an independent audit on compliance of the conditions of the
Corporate Governance Code as well as the provisions of relevant Bangladesh Secretarial Standards (BSS)
as adopted by lnstitute of Chartered Secretaries of Bangladesh (ICSB) in so far as those standards are not
inconsistent with any condition of this Corporate Governance Code'

We state that we have obtained all the information and explanations, which we have required, and after
due scrutiny and verification thereof, we report that, in our opinion:

(a) The Company has complied with the conditions of the Corporate Governance Code as
stipulated in the above mentioned Corporate Governance Code issued by the Commission or
not complied (if not complied, specify non-compliances);
(b) The company has complied with the provisions of the relevant Bangladesh Secretarial
Standards (BSS) as adopted by the lnstitute of Chartered Secretaries of Bangladesh (ICSB) as
required by this Code or not complied (if not complied, specify noncompliance);
(c) proper books and records have been kept by the company as required under the Companies
Act, !994, the securities laws and other relevant laws or not complied (if not complied, specify
non-compliances); and
(d) The governance of the company is highly satisfactory or satisfactory or not satisfactory.

Place: For...'.......... (Name of the firm)

Dated -- (Signature with name and designation)

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 Corporute Laws and Practices

QUESTION FOR DISCUSSION:

Question XYZ Company Limited (a publicly listed company) has appointed your
firm to certify the
compliance status of Notification dated July 3,201.2 of Bangladesh Securities and
Exchange Commission. You are required to give appropriate recommendation, if
required, from the following facts:

a) The Board of XYZ Company Limited is consisted of nine directors out of whom one is
independent director. The independent director holds 1..00% shares of the
Company.

b) The Audit Committee of XYZ Company Limited is consisted of three directors. The
Chairman of the Audit Committee holds 5% shares of the Company;

c) The Statutory Auditors of XYZ Company Limited have been assigned to look after
the internal audit issues and financial information systems design.

d) XYZ Company Limited has one fully owned subsidiary namely ABC Company Limited.
The Board of the subsidiary is comprised of two directors who are also directors of
XYZ Company Limited.

e) The Audited Financial Statements of the Company which was duly recommended by
its Audit Committee was approved by the Board of Directors of the Company for
placement in the AGM to be held in the next month.

f) What should the Company do if it wants to be compliant in the situation mentioned

in (a) above keeping all of its existing directors and their shareholdings unchanged?

Answer a) Regarding appointment of independent director(s) XYZ Company Limited is fully non-
compliant. The Company should have at least two independent directors (one fifth of
the total number of directors) whose individual shareholding shall be less than 1.00%
in the share capital of the Company.

b) The Chairman of the Audit Committee of XYZ Company Limited shall be an

independent director holding less than 1,.O0% shares in the Company , Hence, the
shareholding of the existing lndependent Director must be reduced.

c) XYZ Company Limited cannot assign its Statutory Auditors to look after the internal
audit issues and financial information systems design.

d) Since ABC Company Limited is a subsidiary of XYZ Company Limited, a public limited
company, it shall have minimum three directors in its Board at least one of whom
shall be independent director.

e) Since the formation of the Audit Committee is not in accordance with the Guidelines
of Bangladesh Securities and Exchange Commission the recommendation of the said
Audit Committee will not be valid. Therefore, the Audited Financial Statements of
the Company to be placed in the upcoming AGM will not be valid. The followings
shall be followed:

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 Corporate Luws and Practices

L. The AGM should be postponed;

2. The Audit Committee shall be formed complying with the Guidelines of Bangladesh
Securities and Exchange Commission;
3. The newly formed Audit Committee shall recommend the Audited Financial
Statements afresh;
4. Board meeting shall be held afresh for approval of the Audited Financial Statements;
and
5. New date for AGM and record date shall be declared complying with the relevant
regulations.

f) lf XYZ Company Limited wants to be compliant in the situation mentioned in (a)

it should appoint three more independent
above keeping all the existing directors
directors complying with the guidelines of Bangladesh Securities and Exchange
Commission.

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 Corporate Laws and Pructices

Chapter 2

Laws relating to The Securities and Exchange Commission

Bangladesh Securities and Exchange Commission (Public lssue) Rules,2O!5

Requirements for filing application for a public offer:

(1) Application for consent under these Rules may be made on any of the following methods:

(a) fixed price method, when offered at par value; or

(b) book-building method, when offered above par value.

(2) General requirements: An issuer may make an application for public offer of its securities, if-

(a) it offers an amount of at least equivalent to LO% of its paid-up capital (including intended
offer) or Tk. L5 crore at par value, whichever is higher;

(b) it has minimum existing paid up capital of Tk. 15 crore;

(c) it has not made any material change including raising of paid-up capital after the date of
audited financial statements as included in the prospectus;

(d) the issue manager is in no way connected with the issuer not does hold any of its securities;

(e) ithas prepared its financial statements in accordance with the requirements of the
Securities and Exchange Rules 1987, the provisions of IFRS /lAS as adopted in Bangladesh
and audited the same as per Bangladesh Standards on Auditing (BSA) as well as the
Companies Act, !994 and other applicable legal requirements;

(f) it has got cost audit by professional accountants as per the Companies Act lgg4, if
applicable;

(g) it has got its latest financial statements audited by the panel auditors as declared by the
Commission from time to time;

(h) it has been regular in holding annual general meeting (AGM);

133 ll];;g*
 Corporute Laws and Practices

(i) it has complied with the provisions of Corporate Governance guidelines as

published by the Commission from time to time;

(j) it has complied with all the requirements of these Rules in preparing prospectus;

(k) it has no accumulated retained loss at the time of application;

(l) it has complied with the provisions of guidelines regarding valuation of assets, if any, as
published by the Commission from time to time; and

(m)The issuer or any of its directors is not a bank defaulter

(3) Additional requirements for fixed price method:

(a) if it has been in commercial operation at least for immediate last 3 (three) years, it has
positive net profit after tax and net operating cash flow at least for immediate preceding 2
(two) financial years; if it has been in commercial operation for a period less than 3 (three)
years, it has positive net profit after tax and net operating cash flow at least for the latest
financial year; if it has not started its commercial operation or not completed any financial
period yet, it has positive projected net profit after tax and net operating cash flow; and

(b) at least 35% of the issue has been underwritten on a firm commitment basis by the
underwriter(s).

(4) Additional requirements for book-building method:

(a) it has been in commercial operation at least for immediate last 3 (three) years;

(b) it has made net profit after tax at least for immediate preceding 2 (two) financial years;

(c) it has positive net operating cash flow at least for immediate preceding 2 (two) financial
years;

(d) it has appointed separate persons as issue manager and registrar to the issue for managing
the issue;

(e) the issuer/issue has been rated by a credit rating company registered with the Commission;

(f) at least 35% of the issue has been underwritten on a firm commitment basis by the
underwriter(s).

(5) Additional requirements for Repeat Public Offer

A. An issuer of a listed securities may make repeat public offer, subject to compliance with the
following conditions:

as price sensitive
(a) lnformation concerning the repeat public offer shall be disseminated
information immediately upon board decision as well as upon approval at the general

134 1F'ig*
 Corporate Laws and Practices

meeting and approval of the Commission, in accordance with the relevant notifications
issued by the Commission;

(b) There should be an explicit announcement while disseminating the information in first
two events under sub-rule (a)that the repeat public offer shall be subject to approval of
the Commission;

(c) Such offer has been approved by the board, the shareholders in a general meeting, and
the consent to which is obtained from the Commission;

(d) The proceeds of previous public offer or rights issue, as the case may be, have been
utilized fully and relevant reports were duly submitted to the Commission;

(e) The issue has been fully underwritten on a firm commitment basis by the
underwriter(s); and

(f) The issuer/issue has been rated by a credit rating company registered with the
Commission.

B. Distribution mechanism of securities having conversion features

(a) At least 40% of the issue shall be reserved for the existing shareholders;
(b) At least 40% of the issue shall be reserved for Public Offer; and
(c) Maximum 20% of the issue may be made through private placement:

Provided that the securities so issued shall not be converted either partly or fully before a
minimum period of 2(two) years of issuance.

1. Submission of application and processing thereof

(1) General Requirements

a) an issuer shall submit the application, to the Commission for consent of issuance of
securities through public offer and the exchanges for listing in the main boards thereof,
as per requirements of these rules and relevant listing regulations of the exchanges,
along with ten copies of the red-herring prospectus/prospectus/information memorandum,
prepared as per requirements of these Rules, duly completed, together with all annexes
thereto, duly signed on each page, by the issuer's chief executive officer or managing
director, chief financial officer, company secretary and chief executive officer or managing
director of the issue manager;

b) immediate after submission of the application, the issuer shall post the red-herring
prospectus/prospectus/information memorandum in the websites of the issuer and the
issue manager(s) which shall be updated with any change made thereof;

c) the audited financial statements of the issuer must be submitted along with the application
and prospectus/red-herring prospectus/information memorandum, but the said financial
statements shall not be older than 120 days at the time of submission to the Commission;

135 1t)*gi:
 Corporate Laws and Practices

d) all the required documents as per Annexure - A, B, C, D and G shall be submitted with the
application;

e) any amendment to the prospectus, signed by the said persons, shall also have to be filed
with the Commission and the exchanges, in accordance with clause (a);

f) after receiving the application, the exchange(s) shall submit its primary recommendation to
the Commission along with checklist, within 20 (twenty) days of receipt of the application
and public offer documents, after due examination of the same in line with the provisions of
these rules;

g) the Commission shall verify the application, documents and primary recommendation of the
exchanges;

h) the Commission or the exchanges may require the issuer or its directors, officers, issue
manager(s), auditors, valuer(s), to submit additional disclosure, information, documents,
certification and clarification, as the case may be, to produce or to disclose, in the
prospectus, red-herring prospectus or the information memorandum for sale of securities,
within such time as may be stipulated;

i) the issuer or its directors, officers, issue manager(s), auditors, valuer(s) shall fulfill such
requirements within such time;

j) the exchange(s) shall submit its final recommendation along with a declaration as
prescribed in the listing regulations to the Commission on the issue within seven days of
receiving such additional disclosure, information, documents, certification and clarification.
All the communications to or from the exchanges shall be intimated to the Commission;

k) the Commission, after examination of the information, documents, recommendations of the

exchanges and considering all the factors, shall take decision to approve or reject the
application for public offer of securities through issuance of prospectus.

(2)Additional requirements for book building method:

(a) Conducting road show and submission of application

The issuer/issue manager shall send invitation to the eligible investors, both in writing and
through publication in at least 5 (five) widely circulated national dailies, giving at least L0
(ten) working daysE time, to the road show indicating time and venue of such event. The
invitation letter shall accompany a red-herring prospectus containing all relevant
information covering the proposed size of the issue and at least 3 (three) years audited
financial statements and valuation report, prepared by the issue manager without
mentioning any indicative price, as per internationally accepted valuation methods. The red-
herring prospectus shall be prepared without mentioning the issue price or number of
securities to be offered;

ii. Representatives from the exchanges shall present in the road show as observers;

136lPng*
 Corporate Lsws and Practices

iii. Eligible investors shall submit their comments and observations, if any, to the issuer or issue
manager within 03(three) working days of the road show;

iv. (iv) After completion of the road show, the red-herring prospectus shall be finalized on the
basis of comments and observations of the Els participated in the road show. The valuation
report as finalized must be included in the red-herring prospectus including detail about the
qualitative, quantitative factors and methods of valuation;

v. The application along with the red-herring prospectus and required documents shall be
simultaneously submitted to the Commission and the exchanges as per rule 4(1)(a).

(b) Consent for bidding to determine the cut-off price: After examination of the prospectus and
relevant documents, the Commission, if satisfied, shall issue consent to commence bidding
by the eligible investors for determination of the cut-off price.

(c) Determination of the cut-off price

Eligible investors shall participate in the electronic bidding process and submit their
intended quantity and price: provided that any connected person on related party of the
issuer shall not be eligible to participate in the bidding process;

il No eligible investor shall quote for more than 10% (ten percent) of the total amount offered
to the eligible investors;

iii. Eligible investorsE bidding shall be opened for 72 (seventy-two) hours round the clock;

iv' The bidding will be conducted through a uniform and integrated automated system of the
exchanges, especially developed for book building process;

v. The value of bid at different prices will be displayed on the screen without identifying the
bidders;

VI The bidders shalldeposit at least 20% (twenty percent)of the bid amount in advance in the
designated bank account maintained by the exchange conducting the bidding;

vil The bidders can revise their bids for once, within the bidding period, upto2O%variation of
their first bid price;

vilt After completion of the bidding period, the cut-off price will be determined at nearest
integer of the lowest bid price which the total securities offered to eligible investors would
be exhausted;

ix All the eligible investors participating in the bidding shall be offered to subscribe the
securities at the cut-off price. lt is mandatory for Els bidding at or above the cut-off price to
subscribe up to their intended quantity but optional for Els bidding below the cut-off price;

x. The eligible investors shall be allotted securities on pro-rata basis within their category-
wise quota at the cut-off price. The category-wise quota shall be determined on the basis

137lPage
 Corporute Luws and Practices

of distributing the total securities reserved for other eligible investors equally to each of
the category of eligible investors participating in the bidding, except mutual funds. Mutual
funds shall be allotted securities reserved for them on pro-rata basis;

xi. The securities shall be offered to general public for subscription at an issue price to
be fixed at1.O% discount (at nearest integer) from the cut-off price;

xii. The issuer and the issue manager shall prepare the draft prospectus including the status of
bidding, cut-off price, list of eligible investors with number of securities subscribed for,
price and number of securities for offering to the general public and submit with relevant
documents, simultaneously to the Commission and the exchanges within 5 (five) working
days from the closing day of bidding.

(d) Subscription by the eligible investors

(i) After examination of the draft prospectus and relevant documents, the Commission,
if satisfied, shall issue consent for raising of capitalfrom the general public and approve
the prospectus;

(i) The balance amount of subscription shall be paid by the eligible investors prior
to the date of opening of subscription to the general public: provided that in case of
failure to deposit the remaining amount by the eligible investors, advance bid money
deposited by them shall be forfeited by the Commission and the unsubscribed securities
shall be taken up by the underwriters.

7. Publication of prospectus and opening of subscription list

1. Upon receiving the consent of the Commission to the issue of capital under
these rules, the abridged version of prospectus as approved by the
Commission, shall be published by the issuer in four national daily newspapers
(in two Bangla and two English), within the time specified in the letter of
consent issued by the Commission. The full prospectus shall, however, be
posted on websites of the Commission, exchanges, issuer and the issue
ma nager(s).

2. The subscription for general public shall commence after 25 (Twenty-f ive)
days of the publication of the abridged version of the prospectus and shall
remain opened up to Z5th ltwenty fifth) working day from the date of
publication of abridged version of prospectus. The subscription shall be made
as per the public issue application process mentioned in the consent letter.

3. Upon completion of the period of subscription for securities as mentioned in

sub-rule (2), the issuer shall inform the Commission and the exchanges,
within five working days of closure of such completion, in respect of the
following matters, namely:

(a) total number of securities for which subscription has been received; and
(b) amount received from the subscription.

l38 l l'r ; *
 Corporate Luws and Practices

4. Prospectusdeliveryrequirements

L. Sufficient copies of prospectus shall be made available by the issuer so that any person
requesting a copy may receive one;

2. The issuer shall post the prospectus vetted by the Commission in the issuer's website
and also put on the websites of the Commission, exchanges, and the issue manager
within three working days from the date of according consent which shall remain posted
till the closure of the subscription list. The issuer shall submit to the Commission and the
exchanges the vetted Prospectus in "MS- Word" format;

3. A notice shall be placed on the website that interested persons are entitled to the
prospectus, if they so desire, and that copies of prospectus may be obtained from the
issuer and the issue manager.

5. Lock-in: Ordinary shares of the issuer shall be subject to Iock-in, from the date of issuance of
prospectus or commercial operation, whichever comes later, in the following manner:

1) at the time of according consent to the public offer, by sponsors, directors

All shares held,
and shareholders holding SYo or more shares, other than alternative investment funds, for
03(three) years;

2) All shares allotted, before 02(two) years of according consent to the public offer, to any
person, other than alternative investment funds, for 03(three) years;

3) ln case any existing sponsor or director of the issuer transfers any share to any person, other
than existing shareholders, within preceding 12 (twelve) months of submitting an application
for raising of capital or initial public offer (lPO), all shares held by those transferee shareholders,
for 03(three) years;

4) 25o/o of the shares allotted to eligible investors, for 03 (three) months and other 25% of the
shares allotted to them, for 06 (six) months;

5) All shares held by alternative investment funds, for 01(one) year; and

6) Shares allotted, within two years of according consent to the public offer, to any person other
than the shares mentioned in sub-rules (L), (2), (3), (4), and (5)above, for 0L(one)year.

Provided that ordinary shares converted from any other type of securities shall also be subject to lock-
in as mentioned above.

11. lssue Manager

1) The issuer shall appoint one or more issue manager, registered with the Bangladesh Securities and
Exchange Commission, for the purpose of making the public offer.

2) The issue manager(s) shall be entitled to fees and be responsible for the issue including
preparation and disclosures made in the prospectus, road show and use of the public issue proceeds
by the issuer.

l39lPag*
 Corporate Laws und Practices

12. Underwriters

1) The issuer making public offer shall appoint underwriter(s), registered with the Bangladesh
Securities and Exchange Commission, on a firm commitment basis;

2) The issuer, in the event of under subscription, shall send notice to the underwriter(s) within ten days
of closure of subscription calling upon them to subscribe the securities and pay for this in cash in full
within fifteen days of the date of said notice and the said amount shall be credited into securities
subscription account within the said period;

3) The underwriting agreement shall contain a condition to the effect as mentioned in sub-rule (2);

4l The issuer shall, within seven days of the expiry of the period mentioned in sub rule (2), send to the
Commission proof of subscription and deposit of the money by the underwriter(s).

15. Approval, rejection and review

1) On receipt of an application of consent for public offer from an issuer, the Commission shall
review the aid application to ascertain whether it is complete and acceptable;

2) ln case the said application is incomplete, the Commission shall inform the issuer in writing, to
remove the incompleteness/deficiencies, within 40 (forty) working days, after examination of the
said application;

3) lf the issuer fails to remove the incompleteness within the stipulated time, it shall have to file a fresh
application;

4l The Commission shall issue letter of consent, subject to such conditions as it may deem fit to
specify, within 60 (sixty) working days of receipt of a complete application, if such application is
acceptable to the Commission;

5) lf the application is not acceptable to the Commission, it shall issue a rejection letter, stating the
reasons for such rejection, within 60 (sixty) working days of receipt of the last correspondence;

6) The issuer, whose application has been rejected by the Commission, may apply for review to the
Commission within 60 (sixty) working days from the date of such rejection, and the decision of the
Commission thereon shall be final;

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 Corporate Laws and Practices

Securities and Exchange Commission (Rights Issue) Rules, 2005

Conditions to be fulfilled prior to making rights issue: An issuer of a listed security may make rights
issue by issuing rights share offer document subject to compliance with the following:

(a) such rights issue and price thereof have been approved by the shareholders in a general meeting;

(b) the proceed of previous public offering, or rights issue, has been utilized fully;

(c) annual general meeting has been held regularly;

(d) the rights issue has been fully underwritten on a firm commitment basis by the underwriter;
(e) the financial statements of the company is prepared as per lnternational Accounting Standards
(lAS), as applicable in Bangladesh, and audited as per lnternational Standards of Auditing (lSA) as
applicable in Bangladesh;

(0 the issuer or any of its directors is not a bank-defaulter;

(g) the issuer has been credit rated by a credit rating company, if the offer is at a premium; and

(h) Profitability record in the immediate preceding year.

4. Pricing and ratio of rights share.

(1) The issuer of a listed security making rights issue shall determine the price of its rights share
in consultation with the issue manager.

(2) No issuer of a listed security shall price its rights share above par value, if it has not been in
commercial operation for immediate past three years having a track record of profitability.

(3) The number of rights share proposed shall not exceed five for each existing share held in the
company.

7. Filing of the application for rights share offer:

(l) An application for

issuing rights share along with the offer document shall be furnished to
the Commission for approval within 15 (fifteen) working days of approval of such issue by the
shareholders of the company in a general meeting.

(2) Such document shall be submitted to the Commission along with

(a) the copies of underwriting agreement, issue management agreement, agreement with the
banker to the issue;

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 Corporate Laws and Practices

(b) original auditors' report and certificate with the related financial statements;

(c) relevant extract of the minutes of the general meeting;

(d) undertakingsforthecompanyitself and its directors inprescribedClBform;

(e) a bank pay order or demand draft issued in favor of the Securities and Exchange Commission as
payment of application fee for an amount of taka ten thousand only;

(f) Credit Rating Report of the issuer, if the offer is at a premium;

(g) Memorandum and Articles of Association Return of Allotment of Shares and Particulars of
Directors;

(h) Summarized cash-flows statement, profit and loss account and balance sheet, and dividend
declared and paid for each of the five years immediately preceding the issue of rights share offer
document or for such shorter period during which the issuer was in commercial operation; and

(i) Due diligence certificate by the directors as per Form- D.

(3) The Chief executive officers of the issuer and the issue manager, by whatever name called, shall
jointly certify under their full signature and seal on each page of the copy of documents submitted to
the Commission under these rules,

(a) The rights share offer document, along with the audited financial statements, must be submitted to
the Commission within 120 days of the end of the period for which the said financial statements is
prepared.

8. Contents of the rights share offer documents: Rights share offer document shall include, among
others, the following information, namely:

(a) Date of the rights share offer document.

(b) Amount of rights shares, divided into number of shares, par value and issue price of each share,
and number of right share offered for each existing share.

(c) Highlight of the rights offer, riskfactors, and management plans for reduction of such risks.

(d) Date and time of opening and closing of subscription.

(e) Purposes of raising fund through rights share, specifying clearly the heads and amount of the fund
utilization and identifying various proposed projects with heads and amount of expenditure for
each projects, and also highlights of such projects.

(0 Name of the products manufactured orto be manufactured orservices rendered orto be rendered
by the issuer together with capacity or proposed capacity of the existing and proposed projects vis-
a-vis capacity utilized by the existing project during the last three years or such shorter period
during which the issuer was in commercial operation.

142 1l]*g*
 Corporate Laws and Practices

(g) lf the issue price of rights share is higher than the par value thereof, justification of the premium
should be stated with reference to-

i. net asset value per share at historical or current costs;

earning-based-value per share calculated on the basis of weighted average of net

profit after tax for immediately preceding five years or such shorter period during
which the issuer was in commercial operation;

average market price per share for the last six months immediately prior to the offer
for rights issue; and

(h) Cash flows statement, profit and loss account, balance sheet, changes in equity and notes to the
accounts of the issuer, together with certificate from the auditors

(i) Summarized cash-flows statement, profit and loss account and balance sheet, and dividend
declared and paid for each of the 5 (five) years immediately preceding the issue of rights share
offer document or for such shorter period during which the issuer was in commercial operation.

U) Length of time during which the issuer has carried on business

(k) lmplementation schedule for completion of each segment of the project along with the proposed
dates of trial and commercial operation of the proposed project.

(1) Quantity of shares held by each director and persons who hold 5% or more of the paid-up share
capitalof the issuer on the date of the rights share offer document.

(m) Name, address, description and occupation of directors; managing director, managers and
company secretary of the company.

(n) Name of the public listed companies under common management, if any

(o) Name and address of the underwriter(s) along with the number of shares underwritten by each
underwriter and also the name and address of issue manager, auditors, legal adviser and
banker to the rights issue.

(p) Particulars along with the terms and conditions of the material contracts including vendors'
agreement, underwriting agreement, issue management agreement, agreement with the
banker to the issue and contract for acquisition of property, plant and equipment.

(q) Number of rights shares that the directors are going to subscribe and in case they propose to
make renunciation, the reasons and extent of such renunciation.

143 1tr)agr
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(r) Statement of actual utilization of fund raised by public offering of shares or rights shares, if
any, prior to the proposed rights issue vis-a-vis plan therefor.

(s) Application form for depositing the subscription money with the bankers to the issue for the
rights share, with the provision for renunciation of the rights offer.

(t) Declaration about the responsibility of the issue manager, the underwriter, the auditors and
the directors in Forms-A, B, C and D respectively.

(u) A statement that a lock-in on the rights shares of the directors (including their renounced
shares) for a period of three years from the date of closure of the rights share subscription
shall be operative.

(v) A declaration that the rights shares to be issued in dematerialized form and the subscribing
shareholders have to apply with respective depository accounts.

(w) Credit Rating Report of the issuer, if the offer is at a premium

9. Public announcement for rights issue: (1) The issuer of a listed security making offer for rights issue
sha ll:

(a) Announce two separate dates, for the purpose of record dates, one for shareholders' decision
regarding the proposed rights issue and the other for determination of entitlement of rights issue
after the Commission accords approval.

(b) For the purpose of determination of entitlement of rights issue under these Rules, the issuer shall,
within three working days from the date the Commission accords approval to the issuer under
these Rules, announce the record date.

(c) Disseminate the receiptof the Commission's approval along with purpose of the rights issue,
amount of issue, price of rights shares as a price sensitive information as prescribed by the
Commission mentioning the record date for the determination of entitlement of rights share and
subscription opening and closing dates will be disclosed within three working day.

(d) Commence record date as per (b) above, not earlier than fourteen working days and not later than
twenty-one working days from the date of approval by the Commission.

(e) deliver offer document approved by the Commission to the shareholders entitled to have rights
shares, stock exchange(s) and the Commission within 10 (ten) working days from the record date as
mentioned in (b)above.

(f) The issuer shall post the rights offer document in the issuer's website and also put on the websites
of the Commission, stock exchanges, and the issue manager within 3 (three) working days from the
date of according consent and shall remain posted till the closure of the subscription period as
mentioned in sub-rule (1) of rule 12.

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 Corporate Laws and Practices

(2) Once approval is obtained, no rights offer can be withdrawn or cancelled or postponed or varied by
the issuer without prior written consent from the Commission.
12. Subscription:

1) Subscription shall be received through the banker to the issue during the subscription period
of not less than fifteen days and not more than thirty days.

2) Subscription opening date shall commence after fifteen days from the record date as
mentioned in rule 9(d).

13. Information on raising of rights issue fund: The issuer of rights share shall furnish to the
Commission:

(a) Statement of the subscription received against the offer for rights issue within ten days of the
closing of the subscription lists; and

(b) Statement of the subscription received from the underwriter against the under subscribed shares
within seven days of the expiry of the subscription period allowed to the underwriter(s) under rule
6,

14. Lock-in on rights share: The rights share of directors and other shareholders holding 5% or
more shares shall be subject to lock-in for a period of three years from the date of closure of the rights
share subscription. ln the event of renunciation of rights share by aforesaid persons, the renounced
shares shall also be subject to lock-in for the same period. The issuer shall ensure compliance of this
rule.

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 Corporute Laws and Practices

Securities and Exchange Commission (Private Placement of Debt Securities) Rules,2012

Rule Number 1: Short title and application:

1) These rules may be called the "securities and Exchange Commission (Private Placement of Debt
Securities) Rules, 201-2".

2) These rules shall be applicable for the issuance of debt securities by an issuer, unless otherwise
it is either exempted by the Securities and Exchange Commission or governed or regulated by
the Commission through any other rules or notification or order issued from time to time.

3) These Rules shall be applicable for issuance of debt securities through private placement.

4) No issuer shall make an offer of debt securities, or shall publish an information memorandum or
offer document for issuance of debt securities unless it obtains consent of the Commission.

Rule Number 3: Conditions to be fulfilled prior to making an application for issuance of debt securities

An issuer may make an application to the Commission for issuance of debt securities, subject to
fulfillment of the following:

1) Total debt of the issuer, including the proposed issue, does not exceed 60% (sixty percent) of its
total tangible assets:

Provided that in case the debt-equity or capital adequacy ratio of an issuer is determined by its
primary regulator, the issuer fulfills that requirement:
Provided further that the Commission may consider variation of the above-mentioned ratio, if it
thinks fit taking into account the industry scenario of the issuer.

2\ The issuer has a good track record of profitability and liquidity or its forecasted financial position
indicates a significant profitability, liquidity and ability to pay-back with reasonable basis of
making such forecasts.

3) The issue is rated by a credit rating company and its periodical surveillance rating shall be done
by the said rating company up to the full and final redemption or conversion of the debt
secu rities.

4l The issuer has a valid enforceable interest over its assets and the right to create charges thereon
in course of issuance of the debt instruments. The issuer has obtained necessary permissions or
consents from its primary regulator in order to issue of debt securities, if required.

5) The issuer has obtained necessary permissions or consents from its primary regulator in order to
issue of debt securities;

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 Corporate Laws and Practices

6) The issuer has appointed a trustee for the issue

7) The financial statements of the issuer is prepared as per Bangladesh Accounting Standards (BAS)
as applicable in Bangladesh, and audited as per Bangladesh Standards of Auditing (BSA).

8) The issue has been approved by the Board of Directors or governing body of the issuer and in
case the issuer is a listed company, by the shareholders in a general meeting,

9) ln case the issuer is a listed company, the information concerning the issue is disseminated as
price sensitive information immediately upon Board decision as well as upon approval at the
general meeting, in accordance with the relevant notifications issued by the Commission; there
should be an explicit announcement while disseminating the information that the issue shall be
subject to approval of the Commission.

10) Trustee to the issue, if applicable, has examined all the documents including the legal and title
documents and has provided a due diligence certificate as per schedule 'D'.

Rule Number 4: Application for consent to the issue of debt securities

1) An issuer (hereinafter also referred to as the applicant) intending to issue debt securities shall
make an application for consent to the Commission as per schedule 'A'.

(2) The applicant shall pay an amount of taka ten thousand (non- refundable) as application fee,
along with the application, by way of pay order or demand draft issued in favor of the
Securities and Exchange Commission.

(3) With the said application, the applicant shall submit the following documents along with the
information memorandum containing the audited financial statements within 120 (one
hundred twenty) days of the end of the period for which the said financial statements are
prepared, namely:

(f) certified copy of memorandum and articles of association or such certified documents, as the
case may be;

(g) certified copy of certificate of incorporation and certificate of commencement of business,

where applicable;
(h) certified copy of particulars of directors or particulars of owners, as the case may be;
(i) certified copy of return of allotment of shares and annual summary of share capital, where
applicable;

U) original auditors' report with the related audited financial statements of the issuer;
(k) purpose of issuance of securities and pran to use of proceeds thereof;

(l) resolution of the board of directors or promoter's resolution deciding to issue debt securities;
(m) minutes of the general meeting approving the issue, in case the issuer is a listed company;
(n) copy of disclosures of Price Sensitive lnformation, in case the issuer is a listed company;

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 Corporate Lsws and Practices

(o) banker's certificate, or bank statement showing deposit of an amount equivalent to the
owners' stake in the issuer, or auditor's certificate in this regard attested by the Managing
Director, or Chief Executive Officer;
(p) certified copy of vendor's agreement in case of capital raised in other than cash;
(q) short description of business;
(r) credit rating report of the issue;
(s) no objection certificate, or clearance from regulatory authority(s) concerned, if required;
(t) draft lnformation Memorandum prepared as per Schedule 'B';
(u) draft Deed of Trust prepared as per Schedule'C';
(v) copy of registration certificate issued by the Commission to the trustee to act as trustee to the
issue of debt securities, where applicable;

(w) Oue diligence certificate of the Trustee as per Schedule 'D';

(x) Repayment schedule of the debt securities in hard and electronic forms.

Rule Number 5: Consideration of the application and decision thereon

(6) On receipt of the application under rule 4, the Commission shall examine it, and if satisfies that
all the requirements of rule 4 are fulfilled, the Commission shall accord consent in writing to
the issue of debt securities, as sought for, within 07 (seven) working days of receipt of the
application with all required documents.

17) lf the the requirements of rule 4, it

Commission finds that the application does not fulfill all
may, within 15 (fifteen) days of receipt of the application, direct the applicant to fulfill the
requirements within such time as the Commission may determine, and on fulfillment of such
requirements the Commission shall accord the consent as prayed for, within 07 (seven)
working days of such fulfillment.

(8) The Commission may call for further information, in addition to the requirements of rule 4, if it
so deems necessary.

(s) lf the Commission finds that the application does not fulfill all the requirements of rule 4, or
where a direction to fulfill such requirements has been given under sub-rule (2) and/or (3) and
the applicant has failed to fulfill such requirements, it may reject the application, stating the
reasons thereof.

Rule Number 5: Review

The applicant whose application has been rejected by the Commission under sub-rule (4) of rule 5,
may apply to the Commission for review of its decision within 30 (thirty) days from the date of such
rejection, and the decision of the commission thereon shall be final.

Rule Number 5: Review Conditions to be fulfilled after getting consent for issuance of debt
securities

(1) Before issuance of the debt securities, the following requirements shall adhere to upon
obtaining consent of the Commission, namely:

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 Corporate Laws and Practices

a) The issuer shall execute the deed of trust as approved by the Commission in favor of the
trustee and register the same under the Registration Act, 1908 (XVl of 190g) and shall
submit a copy of the registered trust deed attested by the Chief Executive Officers of the
issuer and the trustee to the Commission;

b) The issuer shall create charges over the assets only for issuance of secured bond, through
execution of Charge Document(s) in favor of the trustee adhering due legal procedures;

c) The issuer shall execute guarantee(s) in favor of the trustee through observation of required
legal procedures;

d) The trustee shall submit a report to the Commission to the effect that all charges and/or
guarantee(s) as perthe deed oftrust, Subscription Agreements and lM have been executed
properly;

e) The issuer of a listed company shall place the lM and the Deed of Trust in electronic form on
the websites of the issuer and the trustee up to closing of subscription.

(2) The consent for issuance of debt securities shall remain valid for one year from the date of
consent or for such a period as determined by the Commission in the consent letter.

(3) The issuer shall submit a status report of the issue to the Commission within 30 (thirty) days
of
issue of the securities or expiry of the period mentioned in sub-rule (2), whichever comes
earlier.

(4) The issuer shall submit bank statement and banker's certificate to the Commission upon
completion of the subscription.

(5) The issuer shall complete audit of its financial statements and, hold its annual general meeting
within such period as may be specified by the Commission at the time of according the
consent.

(6) The issuer shall submit a copy of such audited financial statements and a copy of its annual
report and the minutes of its annual general meeting within fourteen days of the completion of
the audit or, as the case may be, holding of the annual general meeting.

(7) The Commission may, on application and on good cause shown, extend the time for auditing
the financial statements or submission of the financial statements to the Commission, as the
case may be.

(8) The said company shall inform the Commission any material change that affects
the affairs of
the company, along with the supporting documents and evidences.

(9) The issuer can sell debt instruments only to the eligible investors.

Rule Number 9: Review Registration of Trustee

l49l{'ag*
 Corporate Laws and Practices

1) The trustee of a debt security shall be registered by the Commission under these rules and no
person shall act as trustee to an issue without such registration.

2) The proposed trustee shall apply for registration to the Commission as per Schedule 'E' along
with required information and documents and application fee of taka five thousand only.

3) The proposed trustee shall have the following eligibility criteria to apply for registration,
namely:
(i) Have a minimum paid up capital of taka one hundred million;

(ii) Have adequate manpower and logistic support to discharge its duties as a trustee;

(iii) Have appointed a compliance officer for the trust having a minimum of five
years' service
experience in the financial marke!
(iv) Neither the trustee, nor any of its affiliates or directors have any relation with the issuer;
(v) The trustee shall not act as arranger of the issue and shall not pursue any eligible investor
to or not to invest;
(vi) Have no track record of default, negligence or non-compliance with any of the securities
laws for discharging its duties, if it is in any way connected with the securities market.

4) The trust deed shall be preserved in the trustee's office for observation of the eligible investors'

5) The trustee shall have to perform the following duties and responsibilities in addition to those
described in the deed of trust concerned, namely:

a) The trustee shall act on behalf and for the exclusive interest of the eligible investors;

b) The trustee shall ensure compliance of the issuer as per the requirements of these rules;

c) The trustee shall monitor timely payment of all dues of the issuer to the eligible investors
in terms of the lM or other terms and conditions of the issue of debt securities;

d) The trustee shall ensure creation of charges by the issuer over collateral securities and
obtaining other securities or guarantees in favor of the trustee;

e) The trustee shall enforce its rights, over the collateral securities and other securities or
guarantees when it is necessary to do;

0 The trustee shall call the eligible investors' meeting and shall enforce the decisions within
such time of any default or any act of the issuer which may affect the interest of the
eligible investors as specified in the deed of trust and in the lM;

g) Delay in payment of any dues by the issuer, which is not approved by the trustee shall
be

treated as final default, in such a case the trustee shall enforce its rights over the collateral
process and
securities and other securities or guarantees of the issuer observing due legal
thereafter the trustee shall dispose-off the same to pay the proceeds proportionately to
the eligible investors after deduction of costs related thereto;

150 1P;:p*
 Corporate Luws and Practices

h) ln case the delay is approved by the trustee for a certain period upon any reasonable
ground, the trustee shall ensure repayment of the dues within the approved delay period
along with interest for the delay period at a rate of 2% (two percent) p.a. above the usual
rate of return of the debt instrument;

i) The trustee shall submit an annual compliance report to the Commission regarding the
activities of the issuer including repayment of dues to the eligible investors;

j) for redressal of grievances of the eligible investors

The trustee shall take adequate steps
within one month of the date of receipt of the complaints and he shall keep the
Commission informed about the number, nature and other particulars of the complaints
received and the manner in which such complaints have been redressed;

k) The trustee shall be liable to sue or to be sued on behalf of the eligible investors;

l) The trustee may, if required, inspect or call for books of accounts, records, register of the
issuers and the trust property to the extent necessary for discharging its obligation.

6) The trust deed or appointment of the trustee cannot be varied or modified without prior
approval of the Commission.

7) The Commission may, considering the appeal of two third of the securities holders or in the
event of negligence of its duties or in the public interest, if it thinks fit, replace the trustee of an
issue by a new trustee:

Provided that the trustee shall be given an opportunity of being heard before cancellation of its
appointment.

8) A trustee can resign with prior approval of the Commission which shall not be effective until
appointment of a new trustee and handing over charges by the resigning trustee.

9) A trustee shall cease to exist as trustee of an issue upon full and final settlement of the
securities.

10) The trustee for an issue shall be entitled to an annual trustee fee of maximum 0.25% of the
outstanding amount of the debt securities.

Rule Number 10: Consideration of the application of trustee and decision thereon

1) On receipt of the application under rule 9, the Commission shall examine it, and if it is
satisfied that all the requirements of rule 9 are fulfilled, it shall accord registration to the
trustee to act as trustee to the issue, as sought for, within thirty days of receipt of the
application.

2) lf the Commission finds that the application does not fulfill all the requirements of rule 10, it
may, within twenty days of receipt of the application, direct the applicant to fulfill the
requirements within such time as the Commission may determine, and on fulfillment of
such requirements, the Commission shall accord the consent as prayed for within 30 (thirty)

151 lilagr:
 Corporate Laws and Practices

days of such fulfillment.

3) The Commission may call for further information, in addition to the requirements of rule 9,
if it so deems necessary.

4l lf the Commission finds that the application does not fulfill all the requirements of rule 9, or
where a direction to fulfill such requirements has been given under sub-rule (2) and (3) and
the applicant has failed to fulfill such requirements, it may reject the application, stating the
reasons thereof.

5) lf the Commission decides to award registration to the trustee, the trustee shall pay, within
fifteen days of issuance of the registration certificate, a registration fee of Tk. 50,000.00
(taka fifty thousand) only through a bank draft or payment order issued in favor of the
Securities and Exchange Commission.

Rule Number 11: Substitute trustee

1) lf the trustee resigns or fails to perform its duties under the deed of trust or these rules, the
debt security holders' association shall appoint a substitute trustee.

2l The substitute trustee shall meet the qualification requirements of rule 3 of these rules

3) The trustee which is replaced shall do all that is necessary to substitute the new trustee in
its place.

Rule Number 11: Duties of the trustee upon a default

1) lf an event of default as defined in the deed of trust is known to the trustee, the trustee
shall mail a notice of the default within 07 (seven) days after it occurs to debt holders, each
stock exchange upon which the debts are traded, and the Commission.

2l lf, within 10 (ten) days after mailing of the notice required by sub-rule (L), the officers of the
debt holders'association shall inform the trustee that the debt security holders' association
will meet to consider the default, the trustee shall not act until instructed in writing by the
debt holders' association.

3) lf no meeting of the debt security holders' association is called within 10 (ten) days after
mailing of the notice required by sub rule (1) or the debt security holders'association issues
no written instructions to the trustee within 30 (thirty) days after mailing of the notice, the
trustee shall proceed as required by the deed of trust. lf the debt security holders' met and
issue written instructions to the trustee, the trustee shallfollow those instructions.

4) The trustee shall incur no liability if it follows the written instructions of the debt security
holders'association or, if the debt security holders'association issues no written
instructions, the procedures required by the deed oftrust.

5) lf all efforts of negotiation by the trustee fail, it can take legal action against the issuer for
recovery of the outstanding including principal and interest of the debt securities as per

152 | i) * g i:
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existing laws.

Rule Number 16: Penalties for violations of these rules

1) Any person who violates the provisions of these rules shall be subject to civil and criminal
penalties in accordance with law.

2) No civil penalty may be imposed by the Commission nor criminal

proceedings begun without notice and an opportunity to be heard. The Commission shall
make a record of its proceedings.

3) Appeals from civil penalties assessed by the decision of the Commission shall be to the
Commission and then to the superior court.

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 Corporate Laws and Practices

NOTIFICATION

20 June 2018

No. BSEC/CMRR CD12006-1,581208lAdmin/81:Whereas, the Bangladesh Securities and Exchange

Commission (hereinafter referred to as the "Commission") deems it fit that the consent already
accorded by the Commission, or deemed to have been accorded by it, or to be accorded by it in future,
to the issue of capital by the companies listed with any stock exchange in Bangladesh, shall be subject to
certain further conditions on financial reporting and disclosure in order to enhance disclosure and
transparency in the interest of investors and the capital markeU

Now, therefore, in exercise of the power conferred by section 2CC of the Securities and Exchange
Ordinance, 1969 (XVll of 1969), the Commission hereby imposes the following further conditions to the
consent already accorded by it, or deemed to have been accorded by it, or to be accorded by it in future,
to the issue of capital by the companies listed with any stock exchange in Bangladesh, namely: -

1. Preparation of Financial Statements. -

The financial statements (annual or interim) of the company shall be prepared in accordance with the
Securities and Exchange Rules, 1987 as well as the provisions of lnternational Accounting Standards (lAS)
or lnternational Financial Reporting Standards (IFRS) as applicable in Bangladesh or as per requirements
under the Financial Reporting Act, 2015 as the case may be, unless otherwise specified in the referred
Rules and other rules related to the issue or issuer of securities.

2. Auditing of FinancialStatements. -

(1) The company shall get its annual financial statements or, where applicable, interim financial
statements, audited by duly appointing an auditor or audit firm enumerated in the panel of
auditors as declared by the Commission from time to time'

Explanation: ln this sub-condition, "panel of auditors" means any partnership firm of Chartered
Accountants which is in the panel of the Commission within the meaning of the Bangladesh
Chartered Accountants Order, 1973 (President's Order No. 2 of 1973) as per the guidelines as
prepared by the Commission from time to time in this regard.

(2) The company shall not appoint any firm of chartered accountants as its statutory auditors for a

consecutive period exceeding three years.

(3) The auditor or audit firm shall not also be eligible for performing the auditing of financial
statements of the company for a consecutive period exceeding three years'

1541F*g*
 Corporate Luws and Practices

(4) The chartered accountant or auditor or partner of an audit firm shall make the audit report in
accordance with the lnternational Standards on Auditing (lSA) applicable in Bangladesh
ensuring the provisions of the Companies Acl, 1994, the Financial Reporting Act, 20L5,
securities laws and other relevant laws.

(5) The chartered accountant or auditor or partner of the audit firm shall have to follow or ensure
the compliance with the provisions or professionalisms or practices or ethical requirements of
the lnternational Standards on Auditing (lSA), system of quality control requirement under the
lnternational Standard on Quality Control (ISQC), the Code of Ethics for Professional
Accountants and other relevant standards and pronouncements as applicable in Bangladesh in
conduction of auditing and issuing audit report.

(6) The company shall not get its financial statements audited by any firm of chartered
accountants or auditor which or who is convicted for any offence related to securities or stock
exchange or financial matter under any law, or which or who has been declared ineligible by the
Commission for acting as auditor of any issuer under sub-rule (3B) of rule 12 of the Securities
and Exchange Rules, 1987 or against whom any disciplinary action has been taken by the
lnstitute of Chartered Accountants of Bangladesh (ICAB), or the Financial Reporting Council
(FRC).

3. Adoption of Quarterly Financial Statements.

a) The company shall notify the Commission and the stock exchange in advance the date and
time of its board of directors' meeting specially called for consideration or adoption of its
quarterly financial statements and for declaration of any entitlement including interim
dividend for the shareholders before 3 (three) working days of holding such meeting.

b) The board of directors of the company, while considering or adopting any quarterly financial
statements, shall, in the same board meeting, declare the net asset value (NAV) per share,
earnings per share (EPS) and net operating cash flows per share (NOCFPS) and the board shall
not take any decisions with regard to recommending interim dividend for the shareholders on
the basis of said financial statements without being duly audited and without declaring the
shareholders who shall be entitled to such dividend:

Provided that no stock or bonus entitlement shall be declared as interim dividend:

Provided further that the board of directors may from time to time pay to the shareholders such
interim dividend as appears to the board of directors to be justified by the profits of the company on
the basis of related periodical audited financial statements:
Provided further that the decision about recommending interim dividend and entitlement for such
dividend cannot be changed:

Provided further that the company shall, among others, disclose comparative net asset value (NAV)
per share, earnings per share (EPS) and net operating cash flows per share (NOCFPS) in respect of
the previous period for such NAV per share, EPS and NOCFPS as declared for the current period's
financial statements.
c) lt is optional that the company may call a conference on its quarterly financial statements or
results for its shareholders or investors or analysts or financial reporters or other stakeholders

l55lFag*
 Corporute Laws and Practices

within the shortest possible time but not later than 7 (seven) days from the date of adopting
or considering of such quarterly financial statements by the board of directors and duly
published in the national dailies and posted in the website as well as in one online daily news
site.

d) The Chairperson of the board of directors andlor the Chief Executive Officer (CEO) or
Managing Director (MD), Chief Financial Officer (CFO) and Head of lnternal Audit and
Compliance (HIAC) shall remain present in the above conference for providing explanation on
the quarterly financial results and to answer the queries of the shareholders or investors or
analysts orfinancial reporters or other stakeholders on the said financial results.

e) The company shall notify the stock exchange and the Commission in advance the date, time
and venue of the above conference before 3 (three) days of holding such conference and
immediately publish such notice in at least two widely circulated national dailies, one in
Bengali and the other in English as well as in one online daily news site.

4. Submission of Quarterly Financial Statements

(i) The company excepting the life insurance company shall, within 45 (forty-five) days of end of
the first quarter (af) of the financial year, submit quarterly financial statements (audited or
unaudited) to the stock exchange and the Commission, and publish the same in at least two
widely circulated national dailies, one in Bengali and the other in English as well as in one online
daily news site:

Provided that in case of significant deviation in any parameter between the quarterly periods, the
company shall provide reasons therefor:

Provided further that life insurance company shall, within 90 (ninety) days of end of Q1 of the
financial year, submit quarterly financial statements (audited or unaudited) to the Commission and
the stock exchange, and publish them in the same manner as above.

(ii) The company shall, within one month of end of the second quarter (Q2) of the financial year,
submit quarterly financial statements (audited or unaudited) to the Commission and the stock
exchange, and publish the same in at least two widely circulated national dailies, one in Bengali
and the other in English as well as in one online daily news site:

Provided that in case of significant deviation in any parameter between the quarterly periods, the
company shall provide reasons therefor.

(iii) The company shall, within one month of end of the third quarter (Q3) of the financial year,
submit quarterly financial statements (audited or unaudited) to the Commission and the stock
exchange, and publish the same in at least two widely circulated national dailies, one in Bengali
and the other in English as well as in one online daily news site:

Provided that in case of significant deviation in any parameter between the quarterly periods the
company shall provide reasons therefor.

(iv) Oisclosure of quarterly (Q1, Q2 and Q3) financial statements shall be in accordance with the

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provisions of the Securities and Exchange Rules, 1987 as well as the provisions of the
lnternational Accounting Standards (lAS) or lnternational Financial Reporting Standards (IFRS) as
applicable in Bangladesh, as the case may be, unless otherwise specified in the referred Rules
along with special disclosures on:

(a) detailed break-up or composition of shareholders' equity: paid-up capital, share premium
and number of ordinary shares with face value and date of issue, preference share capital,
number of preference shares with face value and date of issue, conversion features of
preference shares (if any) with conversion date, conversion features of any other securities
(if any) with conversion date, detailed break-up of reserve and surplus;
(b) calculation of net asset value (NAV) per share;
(c) calculation of basic and diluted earnings per share (EPS);

(d) calculation of net operating cash flows per share (NOCFPS); and
(e) in addition to disclosures on direct method of cash flows, a reconciliation of net income or
net profit with cash flows from operating activities making adjustments for non-cash items,
for non-operating items and for the net changes in operating accruals.

5. Submission of Annual Financial Statements

(1) Annual financial statements of the company except a life insurance company shall be audited
within L20 (one hundred and twenty) days from the date on which the company's financial
year ends and a copy of such audited financial statements shall be submitted to the
Commission and the stock exchange within fourteen days thereof:

Provided that a listed life insurance company shall, within 3Oth June of Gregorian calendar, submit
the audited annual financial statements to the Commission and the stock exchange:

Provided further that on an application filed by the company under rule 12(34) of the Securities and
Exchange Rules, 1987, the Commission may, on good cause shown and only under extreme
circumstances, extend the time for auditing the annual financial statements or submission of the
annual financial statements to the Commission, as the case may, as it deems fit.

(2) Disclosure of annual audited financial statements shall be in accordance with the provisions
of the Securities and Exchange Rules, L987 as well as the provisions of the lnternational
Accounting Standards (lAS) or lnternational Financial Reporting Standards (IFRS) as applicable
in Bangladesh, as the case may be, unless otherwise specified in the referred Rules along with
special disclosures on:

a. detailed break-up or composition of shareholders' equity: paid-up capital, share premium

and number of ordinary shares with face value and date of issue, preference share capital,
number of preference shares with face value and date of issue, conversion features of
preference shares (if any) with conversion date, conversion features of any other securities
(if any) with conversion date, detailed break-up of reserve and surplus;

b. calculation of net asset value (NAV) per share;

c. calculation of basic and diluted earnings per share (EpS);
d. calculation of net operating cash flows per share (NOCFpS); and

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e. in addition to disclosures on direct method of cash flows, a reconciliation of net income or

net profit with cash flows from operating activities making adjustments for non-cash items,
for non-operating items and for the net changes in operating accruals.

6. Adoption of Annual Financial Statements.

a) The company shall notify the Commission and the stock exchange in advance the date and
time of its board of directors' meeting specially called for consideration or adoption of its
annual audited financial statements and for declaration of any entitlement for the
shareholders before 7 (seven) days of holding such meeting.

b) The board of directors of the company, while considering or adopting annual audited
financial statements shall, in the same board of directors'meeting, declare the net asset
value (NAV) per share, earnings per share (EPS) and net operating cash flows per share
(NOCFPS) and also fix the date of the relevant annual general meeting (AGM) and take
specific decisions with regard to:

tij recommending or not recommending dividend for the shareholders on the basis of said
financial statements; and

[ii) the shareholders who shall be entitled to such dividend, if recommended

Provided that the decision about recommending or not recommending dividend and entitlement for
such dividend, if recommended, shall be taken after considering the interim dividend already
distributed and cannot be changed prior to holding of the annual general meeting:

Provided further that no divided shall be paid other than out of profits of the year or any other
undistributed profits:

Provided further that no dividend shall be declared out of the capital reserve account or the
revaluation reserve account or any unrealized gain or out of profit earned prior to the incorporation
of the company, if any, or through reducing paid-up capital or through doing anything so that the
post-dividend retained earnings become negative or a debit balance:

Provided further that in case of declaration of stock dividend for the year, the company shall explain
the reason for declaring stock dividend and utilization of such retained amount as capital (stock
dividend) shall be disclosed in the annual report:

Provided further that the company shall, among others, disclose comparative net asset value (NAV)
per share, earnings per share (EPS) and net operating cash flows per share (NOCFPS) in respect of
the previous year for such NAV per share, EPS and NOCFPS as declared for the current year's
financialstatements.

7. Authentication of Financial Statements. -

ti) Any unaudited financial statements of the company shall be authenticated on behalf of the
board of directors with the signatures of the Chief Executive Officer (CEO) or Managing Director
(MD), Chief Financial Officer (CFO) or Head of Finance and Accounts and the Company Secretary
(CS) including at least two directors of the board until and unless otherwise required by
applicable primary regulators.

158 1F::g*
 Corporate Luws and Pructices

[ii) Any audited financial statements of the company shall be authenticated as per the provisions of
the Companies Act, 1994 and requirement of the Commission as well as requirement of primary
regulator of the issuer, if any.

8. Posting of Financial Statements in the Website. -

The company shall make available the detailed financial statements (annual or quarterly) in its
website as well as in the website of the stock exchange through link arrangement and in case of
quarterly (Q1, Q2, Q3) financial statements, the company shall include the following paragraph in
bold letters at the end of the quarterly financial statements published in the newspapers:

"The details of the published quarterly (Ql or Q2 or Q3) financial statements are available in the
website of the company. The address of the website is".
9. Submission of Annual Report.

(i) The company shall furnish a copy of its annual report in soft form or printed form as the case
may be, including all relevant annual audited financial statements, management's discussion and
analysis, report or certificate on compliance of the Corporate Governance Code and Directors'
Report along with the notice of the annual general meeting, etc., to the shareholders at least l-4
(fourteen) days before the annual general meeting of the shareholders of the company at which
the annual report is to be laid before them and shall simultaneously furnish 30 (thirty) printed
copies of such reports to the Commission and to the stock exchange.

(ii) The company shall publish its annual report in its website linked with the stock exchange within
at least 14 (fourteen) days before the annual general meeting of the shareholders of the
company, with proper notification, specifying the web address, in two widely circulated national
dailies (one in Bengali and one in English) as well as in one online daily news site for general
information of the shareholders:

Provided that the company shall also send the annual report to the e-mail addresses of the shareholders
available in their beneficial owner (BO) accounts with the depository.

[iiiJ The company shall also print sufficient number of annual reports so that any shareholder may
collect the printed copy of the annual report from the registered address of the company or its
lnvestors' Relation Department or from the AGM venue if any shareholder requires in writing
beforehand.

10. Repeal and Savings.

(i) This Notification shall repeal following Notifications, Directive and Order of the Commission, in
full or part, as stated below:

a) Notification No. SEC/CFD-71./2001./Admin/O8 dated March 28, 2OOt, published in the

Bangladesh Gazette on April 29,2001;

b) Notification No. SEC/CMRRCD/2009-l93lAdmin/03-31 dated June 01, 2009, published in

the Bangladesh Gazette on June 29,2009;

c) Condition No. 2 of the Notification No. SEC/CMRRCD/2008-183/Admin/03-34 dated

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 Corporate Laws und Practices

September 27 ,2009, published in the Bangladesh Gazette on January 12,2010;

d) Directive No. SEC/CMRRCD/2009-193/09/Admin/21 dated January 17, 2010, published

in the Bangladesh Gazette on February 20,2010; and

e) Condition No. (b) of the Order No. SEC/CMRRCD/2009-193/104/Admin/26 dated July 27,
201-1, published in the Bangladesh Gazette on September 29,2011 and Order No.
SEC/CMRRCDI2OO}-1931174/Admin/61. dated July 08, 2015, published in the
Bangladesh Gazette on August 30, 2015.

[ii) Notwithstanding the repeal of the Notifications, Directive and Order of the Commission, in full
or part, as stated above, any document or statement or report made or disclosed, resolution
passed, instrument issued or action taken under or in pursuance of the said Notifications,
Directive and Order shall, if in force before the commencement of this Notification, continue to
be in force and shall have effect as if made, disclosed, passed, issued or done under or in
pursuance of this Notification.

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Chapter 3

The Bank Companies Act, 1991 (Amended up to 2018)

Overview on Bank Companv Act. 1991

Contents

lntroduction

Exominotion context

Topic List

1. Preliminary on Bank Company Act, 1991

2. Business of Banking Companies
3. Minimum paid up capital and reserves.
4. Reserve fund and cash reserve
5. appointment and removal of directors and chief executive officer
6. Restrictions on the payment of dividends
7. Restrictions on loans and advances.
8. Licensing and cancel of license of Bank Company
9. Audit & inspection
10. lllegal banking of companies etc.
11. Prohibition of certain activities in relation to banking companies
12. Suspension of business and winding up of banking companies.
13. Speedy disposal of winding up proceedings (Appeals)
14. Miscellaneous (Punishment & fines)
15. lmportant circulars for Bank Companies:

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 Corporate Luhts and Practices

Bonk Companies Act is an importdnt port of the syllobus. Typicolly, twenty percent of the questions come
qct is vitol. Other than
from the port of Componies Act, understonding the bosic precepts reloting to this
Bonk Compony Act, you moy olso expect questions from BRPD & DOS circulars.

you are tikely to be presented with scenorios ond moy have to conclude whether the formotion of Bonk
componies is valid, business of Bonk compony in compliance with law, oppointment and removol of
directors ond chief executive officer hos done properly. Candidotes should be oble to demonstrote their
knowledge of the moin provisions of the Bonk Company Act, 7991.

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 Corporate Laws and Pructices

Act to override articles, memorandum etc.

As per section 6 of Bank Company Act, 1991, this Act will override (supersede) the articles,
memorandum, or in any agreement executed by it, or in any resolution passed by the banking company
in general meeting or by its Board of Directors before or after the commencement of this Act of a
banking company. Any provision contained in the memorandum, articles, agreement or resolution
aforesaid shall, to the extent to which it is repugnant to the provisions of this Act, be void.

1. Business of Banking Companies

1.1.What are the business of banking companies?

Bank companies do banking business, where "Banking business means offering of loan or receiving
deposits of money from the public for investment payable on demand or otherwise and deserves
withdrawal through cheque, draft, order or otherwise (Section-S (p) of the Bank Company Act, 1991).
According to section 7 of the same Act,), in addition to the business of banking, a banking company may
engage in all or any of the following forms of business, namely:

a) the borrowing, raising or taking up of money;

b) the lending or advancing of money either upon or without security;

c) the drawing, making, accepting, discounting, buying, selling, collecting and dealing in bills of
exchange, hoondees, promissory notes, coupons, drafts, bills of lading, railway receipts, warrants,
debentures, certificates, participation term certificates, term finance certificates, musharika
certificates, modareka certificates, such other instruments as maybe approved by the Bangladesh
Bank, and such other instruments and securities whether transferable or negotiable or not;

d) the granting and issuing of letters of credit, traveler's checks, and circular notes;

e) the buying, selling and dealing in gold and silver coins and coins of other metals;

f) the buying and selling of foreign exchange incruding foreign bank notes;

g) the acquiring, holding, issuing on commission, underwriting and dealing in stocks, funds,
shares,
debenture stock, obligations, participation term certificates, term finance certificates, musharika
certificates, modareka certificates and such other instruments and investments of any kind as may
be approved by the Bangladesh Bank;

h) the purchasing and selling of bonds, scrips or other forms of securities, participation term
certificates, term finance certificates, musharika certificates, modareka certificates and, on behalf of

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the constituents of the Bangladesh Bank or others, such other instruments as may be approved by
the Bangladesh Bank;

i) the negotiating of loans and advances;

j) the receiving of all kinds of bonds or other valuables on deposit or for safe custody or
otherwise;

k) providing vaults for the safety of the deposits;

l) the collecting and transmitting of money against securities;

m) acting as agents for the Government, local authorities or any other person;

n) the carrying on of agency business of any description including the clearing and forwarding of
goods and acting as a law agent on behalf of customers, but excluding the business of a
managing agent or treasurer of a company;

o) contracting for public and private loans and negotiating and issuing the same;

p) the effecting, insuring and underwriting of shares, stocks, debentures, debenture stock of any
company, corporation or association and the lending of money for the purpose of any such
issue;

q) the carrying on and transacting of every kind of guarantee and indemnity business;

r) the buying and acquiring of any kind of property including merchandise, patents, designs,
trademarks and copyrights, in addition to, at the normal business period of a bank, such or
similar transactions as-

1) repurchase by the seller, or

2) selling in the way called purchase on rent, or

3) repayment of outstanding rates, or

4) leases, or

5) sharing out of revenues, or

6) financing in any other way;

s) bringing into possession any property which may satisfy or partly satisfy any of the claims of
the banking company and the managing and borrowing of such property;

t) acquiring, holding and managing of any property or any right, title or interest in any such
property which may form the security or part of the security for any loans or advances or
which may be connected with any such security;

u) undertaking and executing trusts;

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 Corporute Laws und Practices

v) undertaking the administration of movable and immovable property as executor, trustee or

otherwise;

w) for the benefit of employees or ex-employees of the banking company or the dependents and
connections of such persons-

1) establishing and supporting, or aiding in the establishment and support of associations,

institutions, funds, trusts or any other establishmenU
2l granting pensions and allowances;
3) making payments toward insurance;
4\ subscribing to any exhibition or any object generally useful;
5) guaranteeing money for all these purposes.
x) the acquisition, construction, maintenance and alteration of any building or works necessary
or convenient for the purpose of the banking company;

y) selling, improving, managing, exchanging, leasing, mortgaging or otherwise

transferring or turning into account or otherwise disposing of all or any part of the property or
rights of the banking company;

z) acquiring and undertaking the whole or any part of the business of any person or company,
when such business is of a nature enumerated or described in this subsection;

Therefore, no banking company shall engage in any form of business other than those referred to in
su bsection

1.2. Use of the Word "Bank" or any of its derivatives.

As per section 8 of Bank Company Act, 199L, Every company carrying on the business of banking in
Bangladesh shall use the word "bank" or any of its derivatives as part of its name and no company other
than a banking company shall use in its name any word calculated to indicate that it is a banking
company:
Provided that nothing in this section shall apply to -

a) any subsidiary company of a banking company formed for one or more of the purposes
mentioned in subsection (1) of section 26 of Bank Companies Act 1991_.;

b) any association of banks formed for the protection of their mutual interest and registered
under section 26 of the Company Act.

Furthermore, the Government may, by notification in the official Gazette grant the right to use the word
"bank" or any of its derivatives as part of its name to any company completely or partly owned or
controlled by the Bangladesh Bank, including non-banking companies.

1.3. Prohibition of certain forms of trading by banking companies

ln accordance to section 9 of Bank Company Act, 1991, no banking company shall directly or indirectly
deal in the buying, selling or bartering of goods, except in connection with the realization of security

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 Corporate Laws and Practices

given to or held by it, or engage in any trade or buy, sell or barter goods for others otherwise than in
connection with bills of exchange received for collection or negotiation or with such of its business as is
approved under section 7.

1.4. Disposal of non-banking assets

Section 10 of Bank Company Act, 1991, no banking company shall hold any immovable property
howsoever acquired, except such as is required for its own use, for any period exceeding 7 years from
the acquisition thereof or from the commencement of this Act, whichever is later. ln this case, section 7
will not be work as reference. However, the Bangladesh Bank may extend the period by a period not
exceeding 5 years where it is satisfied that such extension would be in the interest of the depositors of
the banking company.
For the purpose of this section, property a substantial portion of which is used by a banking company for
its own genuine requirements shall be deemed to be property for its own use.

1.5. Prohibition of employment of managing agents and restrictions on certain forms of employment.

As per Section 11 of Bank Company Act, 1991,

1,. No banking company shall employ or be managed by a managing agent; or shall employ or continue
the employment of any person:

i) who is insolvent or at any time has been declared insolvent or has suspended payment,
or has compounded with his creditors or has been convicted by a criminal court of an
offence out of moral turpitude.

ii) anyone who receives his remuneration or part of his remuneration on commission basis
or as a share in the profits of the company. However, nothing referred to, in this sub-
clause shall apply to the payment of bonus by a bank company in view of a settlement
or award decided or made under any law with reference to industrial disputes; or any
commission to any broker on a contract otherwise than as a regular member of the staff
of the company.

iii) whose remuneration is excessive in the view of the Bangladesh Bank. For the purpose of
this sub-clause "remuneration" shall include wages, fees and advantages in addition to
the wages given by a banking company to whatever person, but not money or
allowances given in order to meet the expenses arising normally from the fulfilment of
one's duties.

Moreover, no banking company shall be managed by any person

banking company or a company registered under section 26 of the Companies Act, except
with the previous approval of the Bangladesh Bank; or

166 lilxgr
 Corporate Laws und Practices

who is engaged in any other business or vocation; or

who had a contract with the company for a period exceeding five years at any one time

2. lf a person holding the office of chairman or director or manager or chief executive officer has been
adjudicated by any court to have infringed the provisions of any law and the Bangladesh Bank is of
the opinion that the infringement is of the nature that the association of such person is or harmful
to the interests of the bank company.

3. Under sub-section (2) it may be provided in an order that the said person shall not without prior
permission of the Bangladesh bank in any way directly or indirectly be involved with or take part in
the management of the said bank company or any other bank company to a period not exceeding 5
years as referred to, in the said order.

4. No order under subsection (2) shall be made unless the concerned person has been given
opportunity of making a representation to the Bangladesh Bank against the proposed order:
Provided that it shall not be necessary to give any such opportunity if, in the opinion of the
Bangladesh Bank, any delay would be detrimental to the interests of the banking company or its
depositors.

However, any decision or order of the Bangladesh Bank made under this section shall be final.

l.6.Restrictions on removal of records and documents (Sec 12).

No banking company shall remove from its head-office or any of its branches, whether they are at the
time being functioning or not, any of its records (electronically or otherwise preserved ledger, day-book,
cash book, account book and all other books) or documents (electronically or otherwise preserved
voucher, cheque, bill, pay order, security for an advance and any other document supporting entries)
relating to its business to a place outside Bangladesh, without the prior permission in writing of the
Bangladesh Bank

1.7.Minimum paid up capital and reserves.

As per section 13 of Bank Company Act, all operating bank Companies in Bangladesh, from time to time,
shall be preserved the capital in specific amount, rates and ways by the Bangladesh Bank.

BRPD Circular Letter No. 11 dated L4 August, 2008 stated that with a view to strengthen financial
sustainability of banking companies working in Bangladesh, empowered by the proviso under section
13(2) of the Banking Companies Act, L991, in consultation with the government, Bangladesh Bank
through the notification no. BRPD(R-1)717/2008-511 dated L2 August 2008 has re-fixed that the
minimum Paid-up Capital and Reserve Fund of banking companies shall be Taka to 400 crores, of which
the Paid-up Capital shall be not less than Taka 200 crore.

To raise Paid-up Capital and Reserve Fund, as mentioned in the notification, banks shall have to follow
the instructions as stated below:

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 Corporate Luws und Practices

(i Banks shall have to fulfill the required Paid-up Capital and Reserve Fund of Taka 400
crore within 3 years from the notification date i.e. within 11- August 2011 and the paid-
up capital will be not less than Taka 200 crore.
(ii) To maintain required capital Banks may raise the Reserve by keeping profit after tax by
issuing right shares or lPO, if applicable.
(iii) Any Bank having shortfall of required capital and reserve will not pay or declare cash
dividend.
(iv) Foreign Banks will have to meet the capital shortfall by not repatriating the profit or by
bringing in additional/Capitalfrom abroad within the stipulated.
(v) ln terms raising the capital, bank-company shall take necessary measures to amend
their Memorandum and Articles of Association.
(vi) Feasibility of merging with other banks and financial institutions may be considered to
ensure the required capital and reserve within stipulated time limit.

Sub-section 3 of section13 states that in case of Bank Company registered outside Bangladesh, if that
bank company does not deposit in Bangladesh Bank in cash or through approved securities without
liability or partly in cash and partly through such approved securities or through any such asset fixed by
the Bangladesh Bank to be kept in Bangladesh Bank as per sub-section (2), that bank company shall not
be deemed to comply provisions of that sub-section.

When the total value of paid up capital and reserve fund is not equal to the amount referred to in this
section-
a) No bank company in existence since the commencement of this Act, shall after the expiry of two
years carry on business in Bangladesh, and;
b) No other bank company other than those referred to, in clause (a) shall after the
commencement of this Act, start its business.

However, Bangladesh bank may if it deems fit in any special case extend the period referred to, in this
sub-section to the extent not exceeding one year. lf Bangladesh Bank is of the opinion that any bank
company is in default to maintain the minimum paid up capital and reserve in compliance with the
provision of this section, it shall be liable to pay the fine prescribed by law.

168 1i]*rl*
 Corporate Laws and Practices

I nte ractive Qu esti o n 7 :

The draft audited financial statements for the year ended 3Lst December 2017 of CD Bank Ltd. (a
schedule commercial bank) has been placed in the board meeting for authorization to issue. The
financial results depict that as per BSEL-lll, the total capital of the bank stood at BDT 7130 million (Paid
up-capital BDT 4,000 million, Statutory Reserve BDT 1,830 million, Retained Earnings BDT 825 million,
1% Provision of Loans & Advances BDf 475 million). The Risk Weighted Assets (RWA) of Bank as per
BASEL-||i stood at Taka BDT 69,200 million and as per BRPD circular ref: L8 dated 2L/1,2/201,4, the
minimum required CapitalAdequacy Ratio is LO%and as such the Risk Based Capital requirement is BDT
6,920 million. ln a confidential note, the Risk Management Division (RMD) of the bank has informed to
the Managing Director that some of big client's rating may be downgraded in the next year due to
Middle East Crisis and RMD has forecasted that RWA may rise to BDT 73,500 in the next quarter. Face
value of share is BDT 10 per share. The majority of the members in the board opined 20% cash divided
while a few including chairman opined to keep the limit to 1,0% cash and 10% bonus as dividend.

a) As a CFO of the Bank, chairman is seeking your professional advice as to how to resolve the
dividend decision as per Bank Companies Act 1991 considering the capital maintenance issue
of the bank.

b) Assume that, the RWA is 73,500 i.e. required capital maintenance increased to BDT 7,350
million. You are required to brief the board on dividend issue, Capital Reservation and future
legal consequences with reference to section -13 & 22 of Bank Companies Act1991.

c) ln another agenda, the Treasury Department has the following proposals for board approval

i) to enhance the existing investment limit of BDT 9OO million to 18OO million in capital
market. The existing limit has dried up and treasury had good performance in the
capital market in the last two years and Management has full confidence on Treasury
Head.

ii) The entire budget (enhancement) would like to invest in the securities of CSD Ltd. lt is
mentioned here that that paid up capital of csD Ltd. is BDT 5000 million.

As a CFO, you are also required to suggest the maximum amount of investment limit for the capital
market and the amount to be invested in CSD Ltd. in line with the provisions 26KA of Bank
Companies Act 1991.

(Hints: As per BASEL-ltt, total capital means = Shoreholders Equity + L% General Reserve on Loans &
Advance+ 50% Revoluation Reserve)

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 Corporate Laws and Practices

1.8. Regulation of paid-up capital, subscribed capital and authorized capital and voting rights of
share-holders.

Section 1 (1) of the that no bank company other than a new bank or a
Bank Companies Act states
specialized Bank incorporated in Bangladesh shall commence business in Bangladesh unless it satisfies
the following conditions:
a) Subscribed capital of the company shall not be less than one-half of the authorized capital.
b) Paid-up capital of the company shall not be less than one-half of the subscribed capital.
c) The conditions referred to under clause (a) and (b) shall be complied with within the period not
exceeding two years as the Bangladesh Bank may direct if the capital of the company is

i ncreased.
d) The capital of the company consists of ordinary share only.
e) Subject to the provisions referred to, in clause (f), the voting rights of any one share holder are
strictly proportionate to the contribution made by him to the paid up capital of the company.
f) Voting rights of any one share-holder, except those of the Government, do not exceed five
percent of the total voting rights of all the shareholders.

According to sub-section (2), every Chairman, Managing Director or Chief Executive Officer by whatever
name called of a bank company, shall supply to the Bangladesh Bank through that bank company
returns of full particulars to the extent and value of his holding of shares, whether directly or indirectly
in the bank company of any change to the extent of such holding or any variations in the rights related
there and such other information relating to those shares as the Bangladesh Bank may, by other, require
and in such form and at a such time as may be specified in the order.

1.9. Reserve Fund

According to section 24, every banking company incorporated in Bangladesh shall create a reserve fund.
lf the amount in such fund together with the amount in the share premium account is not less than its
paid-up capital or the amount of the premium settled from time to time in this behalf for any banking
company by the Bangladesh Bank, shall, out of the profit as disclosed in the profit and loss account
prepared under section 38 and before any money is transferred to the Government or declared as
profit, transfer to the reserve fund a sum equivalent to not less than twenty per cent of that profit.

Where a banking company appropriates any money from the reserve fund or the share premium
account for any purpose, it shall, within twenty-one days from the date of such appropriation, report the
fact to the Bangladesh Bank. However, the Bangladesh Bank may extend the period for such report or
condone any delay in the making of such report.

1.10. Cash Reserve

ln with section 25 of Bank Company Act 1991, every banking company, not being a
accordance
scheduled bank, shall maintain in Bangladesh by way of cash reserve in cash with itsell or with the
Bangladesh Bank or its agent, or both banks in equal parts, a sum equivalent to not less than five per
cent. of its time and demand liabilities. For the purpose, liability shall not include the paid-up capital or
the cash reserves or the credit balance in the profit and loss account of the banking company or the

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amount of any loan taken from the Bangladesh Bank. However, Bangladesh Bank may, in any particular
case, change, by notification in the official Gazette and subject to the conditions settled therein in this
behalf, the requirements relating to the cash reserve or repeal, on previous approval by the
Government, such requirements.

lf any bank fails so to do, shall be punishable by the Bangladesh Bank with a fine of no more than 2500
Takas for every day.

Subsection (3) also mention that if a report submitted under subsection (1) shows that the banking
company which submitted the report maintained an amount of cash less than the amount determined
under subsection (1) at the close of any working day preceding the submission of the report, the
Bangladesh Bank may order the banking company to pay it for those days a penal interest on the said
deficit exceeding by three percent the bank rate, and if a subsequent report shows again that the said
banking company maintained an amount of cash less than the amount determined under subsection (1)
at the close of any working day preceding the day determined for the submission, the Bangladesh Bank
may order the banking company to pay it for those days a penal interest on the said deficit exceeding by
five per cent the bank rate.

lf a banking company has been ordered on the basis of a report submitted by itself to pay a penal
interest exceeding by five per cent the bank rate under subsection (4) and if a subsequent report shows
that it maintains an amount of cash less than the amount determined under subsection (1), the
Bangladesh Bank may order the said banking company not to accept new deposits from such date as the
Bangladesh Bank may determine, and if the said banking company accepts any deposit in disregard of
that order, the Bangladesh Bank may inflict a fine of no more than 5000 Takas on it for every day it does
so, to be paid to the Bangladesh Bank.

1.11. Election of new directors

Section 15 lays down the rules regarding the election of new directors

(1) The Bangladesh Bank may, by order, require any banking company except new and special
banks to call a general meeting of the company within two months from the date of the order or
within such further time as the order may allow in this behalf, to elect in accordance with the
provisions of this ordinance new directors.

(2) Every director elected under subsection (1) shall hold office until the date up to which his
predecessor would have held office, if the election had not been held.

(3) Any election duly held under this section shall not be called in question in any court.

(a) The Bangladesh Bank may, by general order, make provisions to the effect that no banking
company except new and special banks shall appoint its managing directors or chief executive
officers, whatever be the name of the office, without the previous approval of the Bangladesh

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Bank and no managing director or chief executive officer appointed in this way shall be removed
from his office, acquitted or dismissed without the previous approval of the Bangladesh Bank.

1.L2. Term of office of directors, etc. (Sec. 15 AA)

The highest tenure of the position of Director of Bank Company shall be for 3 years from the date of
effectiveness. However, no other Director except the Managing Director or the Chief Executive Officer of
a Bank Company, by whatever named called, shall hold the position of Director in a Bank Company for
more than 3 consecutive terms.
No person having hold an office for a period of nine years without cessation according to subsection 2.
He/she shall be again eligible as director until elapse of 3 years from the date of conclusion of the 3'd
term. three years have passed since the end of the said period.

1.13. Vacancy of the office of a director

As per section 17, the office of a director will be vacant, if any director of a banking company fails to

a) pay advances or loans accepted by him or instalments or interests on that advances/ loans, or
b) pay the money he is bound to for any security, or
c) accomplish any duty or to be accomplished by him and the responsibility for which he has taken
on in writing,

Moreover, the said banking company gives him order through a notice by the Bangladesh Bank to pay
the said advances, loans, instalments, interests or money or to accomplish the said duties and he fails to
accomplish those duties and payments within two months after receipt of the order, in that case the
office of director shall be vacant beginning from the expiry of the said term.

Subsection (2) stated that whoever has received a notice under sub-section (1) may, within thirty days
after receipt of the notice, send his statements on the subject in question, if any, in written form to the
Bangladesh Bank, and a copy thereof to the banking company who issued the notice. The decision of the
Bangladesh Bank on any statement under subsection (2) shall be final.

I nte ro ctive Qu estio n 2 :

Mr. X is a director of CB Bank Ltd., a private scheduled bank listed in DSE and CSE. He fails to pay
Tk.50 million due from him on account of a guarantee given by him against a loan of Tk.75 million
extended to his friend Mr. Y by JB Bank Ltd., a state owned bank. What could be the consequences
with regard to his directorship of CB Bank Ltd. and his due amount to JB Bank Ltd,? Discuss.

L.t4. Restrictions on commission of sale of shares, brokerage, discount etc. (Sec 19)

Notwithstanding anything to the contrary in sections L05 and 105 A of the Companies Act, no
banking company shall pay out directly or indirectly by way of commission, brokerage, discount
or remuneration or otherwise in respect of any shares issued by it, any amount exceeding two
and one-half per cent of the paid-up value of the said shares.

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1.15. Prohibition of charge on unpaid capital.

According to section 20 of Bank Company Act, 1991, no banking company shall create any
charge upon any unpaid capitalof the company. Any such charge, if created, shallbe invalid.

1.16. Prohibition of floating charge on assets. (Sec. 21)

(1) Notwithstanding anything contained in section 7, no banking company shall create a floating
charge on the undertaking or any property of the company or any part thereof, unless the
creation of such a floating charge is certified in writing by the Bangladesh Bank and not being
detrimental to the interests of the depositors of the banking company.

(2) Any charge mentioned in subsection (1) shall, without the certificate of the Bangladesh Bank, be
invalid.

(3) Any banking company aggrieved by the refusal of certificate under subsection (1) by the
Bangladesh Bank may, within ninety days from the date on which such refusal is communicated
to it, appeal to the Government.

The decision of the Government where an appeal has been preferred to it under subsection (3) or of the
Bangladesh Bank where no such appeal has been preferred shail be final.

1.17. Restrictions on the payment of dividends.

Section 22of Bank Company Act, 1991, lays down the rules regarding the payment of dividend

(1) No banking company except new and special banks shall pay any dividend on its shares,
un less:

a) all its capitalized expenses including preliminary expenses, organization expenses,

commission for share selling and brokerage, losses and other items have been
completely written off, or

b) it manages to preserve constantly six per cent of its temporary and demand deposits as
discharged and reserved capital.

(2) Notwithstanding anything to the contrary contained in subsection (1) or in the Companies
Act, any banking company may pay dividends on its shares without writing off under the
following circumstances:

a) in any case where the depreciation of its investments in approved securities has not
actually been capitalized or otherwise accounted for as a loss,

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b) in any case where adequate provision for the depreciation in the value of its
investments in shares, debentures or bonds (other than approved securities) has been
made to the satisfaction of the auditor of the banking company,

c) in any case where adequate provision for bad debts has been made to the satisfaction of
the auditor of the banking company.

lnteractive Question 3:

State the restrictions as to payment of dividend by a banking company other than a new bank or a

specialized bank.

1.18. Restrictions on the employment of common directors (Sec. 23)

1) No banking company incorporated in Bangladesh, except new and special banks, shall have, without
the permission of the Bangladesh Bank, as a director any person who is
a) a director of any other banking company, or a director of an institution lending money
without being engaged in the business of banking;

b) a director of companies which are entitled to exercise voting rights in excess of twenty per
cent of the total voting rights of all the shareholders of the banking company:

Provided that the provisions of this subsection do not apply to directors appointed by the Government

(3) lf immediately before the commencement of this Ordinance any person holding office as a
director of a banking company is also a director of companies which are entitled to exercise
voting rights in excess of twenty per cent of the total voting rights of all the shareholders of
the banking company, he shall, from such commencement within such period as the
Bangladesh Bank may specify in this behalf:

a) either resign his office as a director of the banking company, or

b) choose such companies as are not, on the strength of their shares of the said banking
company, entitled to exercise voting rights in excess of twenty per cent of the total
voting rights of all the shareholders of the banking company as companies in which he
wishes to continue to hold the office of a director and resign his office as a director in
the other companies.

lnteractive Question 4:

Mr. 'X' is a director of ABC Bank Limited, MNO Company Limited, a non-banking financial institution and
other two insurance companies. All are incorporated in Bangladesh; Describe the consequences or legal
provisions for this.

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 Corporate Luws und Practices

1.19. Restrictions on loans and advances.

The primary function of a bank is to collect money from one group of people in the form of
deposit and to grant advance and loans to other groups of people. However, there are certain
restrictions on granting loans and advances. According to section 27(1) no bank company shall
pay any loans or advances against the security of its own share, or sanction unsecured loans or
advances to, or make loans and advances on the guarantee of following persons or
orga nizations:

Any of its directors

lt Any of the family members of its directors.
any commercial institution or private company in which the banking company itself, or any
of its directors or any member of the family of any of its directors is involved as director,
owner or shareholder;
IV any public limited company which is in some way or other controlled by the company itself,
or any of its directors or any member of the family of any of its directors, or the shares of
which are held by any of the said persons to such an extent as to give it control of no less
than twenty per cent of the voting rights.

According to sub-section (2), no bank company shall pay loans or advance without the approval of the
majority of the directors of that bank company excluding the director concerned:

a) to any of its directors or

b) any person, commercial institution or company in which any of the directors of the said banking
company is interested as partner, director or guarantor.

Sub-section (4) states that the Managing Director of every bank company before the end of the month
succeeding that to which the return relates submit to the Bangladesh Bank a return in the prescribed
form and manner showing the particulars of:

all loans and advances sanctioned by it to companies private as well as public in which it or any
of its directors is concerned as a director and
ii all loans and advances sanctioned by it to public companies in which it or any of its directors is

concerned as managing agent or guarantor.

lf on verification of any return submitted under sub-section (4) it appears to the Bangladesh Bank that
any loans or advances referred to in that sub-section have been sanctioned adversely to the interest of
the depositors of the bank company, the Bangladesh Bank may by order in writing prohibit the bank
company from sanctioning any such further loans or advances on the grant there of as it thinks fit and
may be like order direct the bank to secure the payment in advance of any such loans or advances
within such time as may be specified in the order [section 27(5)1.

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lnteroctive Question 5 :

A company namely Asian Holdings Limited has approached the BD Bank Limited to avail a term loan
facility. Asian Holdings Limited has currently 4 credit facilities with 4 separate banks and now is reported
as defaulter by one of the lending banks where its overdue is 7 months.

Can BD Bank Limited in terms of the Bank Companies Act provide loan to the Asian Holdings Limited?

1.20. Restrictions on the respite of loans (Sec. 28)

(1) No banking company shall, without the previous approval of the Bangladesh Bank, grant
respite of loans taken from it by any of the following persons or institutions, -

a) any of its directors, and his family members;

b) a commercial institution or company in which any director of the banking company is

interested as Iandowner, co-director, managing agent; and

c) any such person in which any director of the banking company is interested as partner or
landowner.

(2) Any respite of loans in disregard of the provisions of subsection (1) shall be illegal, and
whoever is responsible for such a respite shall be punishable with imprisonment for no
more than three years or a fine of no more than thirty thousand Takas or both.

1.21 Power of the Bangladesh Bank to control the giving of advances.

Section 29 of the Bank Companies Act provides the following powers to Bangladesh Bank for
regulating the advances of the bank companies:

(1) Whenever the Bangladesh Bank is satisfied that it is necessary in the interest of the public to do
so it may formulate the policy related to advances to be adopted by the bank companies in
general or by any bank company in particular and when the policy has been so determined, all
bank companies or their bank company conceded as the case may be- shall be bound to follow
the policy as so determined.

(2) Without prejudice of the power in general conferred by sub-section. (1"), the Bangladesh Bank
may direct the bank companies either in general or any specialized bank - or special class of
bank companies in the following matters:

a) the credit ceilings to be followed.

b) the minimum ratio of petty loans or other loans to the total advances to be followed
c) the motive for which advances may or may not be made;

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d) the maximum limit of advances which may be given to any bank company or special
group of bank companies or a person or community of persons.
e) secured advance and ceiling of interest on advance.
f) the rates of interest to be fixed on advances.

(3) lf any bank company is in default in complying with the direction referred in clause (a) and (b) of
sub-section (2), the bank company shall by order of the Bangladesh Bank be held to be liable to
deposit such amount as may be determined by it and the bank company shall subject to the
condition specified by that bank under compulsion to comply with the direction. However, the
Bangladesh Bank shall not direct the said Bank Company to deposit an amount not higher than
the amount of which the default has taken place.

(4) The amount deposited with the Bangladesh Bank under sub-section (3) or any part thereof may
be remitted by it to the -bank company conditionally or unconditionally by order in black and
white.

L.22. Jurisdiction of Courts regarding interest rates. (Sec. 30)

Notwithstanding any Act for the time being in force, no transaction between a banking company
and any of its debtors shall be triable by a Court on the mere ground of excessiveness of the
interest rate taken by the banking company.

1.23 Subsidiary Companies

According to section a bank company shall not form any subsidiary company except
26(11, a
subsidiary company for the purpose referred to below:

a) The undertaking and executing of trusts;

b) To take the responsibility of the administration of estates as executor, trustee or

otherwise;

c) Ensuring the arrangement of safe deposit vaults

d) Carrying on banking business according to the principles of sharia;

e) With the prior permission in writing of the Bangladesh Bank. -

i. The carrying on the banking business exclusively outside Bangladesh;
ii. The carrying on the banking business based on the transfer of deposits in foreign
currency acquired from non-residents;

f) Taking initiatives for those businesses which are according to Bangladesh Bank helpful for
expansion and development of bank-business in Bangladesh or necessary for public
interest or deems to be helpful in any other way.

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Sub-section (2) states that except as provided in sub-section (1) no bank company shall hold shares
in any company whether as pledge or mortgage or exclusive owner of an amount exceeding such as:

a) Thirty percent of its paid up share capital and reserves or

b) Thirty percent of the paid up capital of that company. Provided that, any bank company which
on the date of introduction of this Act holding any shares in contravention of the provisions of
this sub-sections shall not be liable to any penalty there for if that bank companies-

lnforms the Bangladesh Bank of the mater without delay and

ii Lessens its holding of shares in accordance with the approved limits of this sub-section
within the period not exceeding two years as the Bangladesh Bank may fix for this
purpose.

Provided further that no bank company shall hold shares in aggregate exceeding 1,0% of its total
liabilities.

According to sub-section 3, notwithstanding anything contained in sub-section (2) if any Managing

Director of a Bank Company remains involved in operation of a company or if there is any interest in
that case after expiry of one year from the commencement of the Act, concerned Managing Director or
Manager of that company shall not hold any share in that company.

1.24, Licensing of banking companies.

Section 3L states that -

(1) Except the circumstances laid down in this section, no Bank company shall carry on banking business
in Bangladesh without banking license issued in that behalf by the Bangladesh Bank.

However, nothing shall be deemed to prohibit Bank Company already in existence on the
commencement of this Act from carrying on banking business if:

(a) its application is under consideration for sanctioning a license; or,

(b) it is not intimated by the Bangladesh Bank by notice that a license shall not be sanctioned to
it.
Moreover, the Bangladesh Bank shall not give a notice referred to above to a bank company already in
existence on the commencement of this Act prior to the expiry of two years in the case of bank
companies registered in of six months in the case of bank companies incorporated
Bangladesh and
outside Bangladesh confined to in sub-section (1) of section 13 or of such further period as the
Bangladesh Bank may under the provision to that sub-section think fit to sanction.

(2) While issuing a license under sub-section (1) the Bangladesh Bank may impose any condition as it
may think fit and proper.

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 Corytorate Laws and Practices

(3) Every bank company already existing on the commencement of this Act prior to the expiry of six
months from such commencement and any other bank company prior to commencing banking
business in Bangladesh shall apply in black and white to the Bangladesh Bank for a license under this
section.

(4) Prior to granting any license under this section, the Bangladesh Bank is to be satisfied by an
inspection of the books of the bank companies or otherwise that all or any of the following
conditions are complied with; namely-

a) that the company is to be in a position to meet the claims of the present or future
depositors.
b) that the activities of the company are not being or are not likely to be conducted
detrimental to the interest of its present or future depositors.
c) that in the case of bank company incorporated outside Bangladesh, the government or law
of the country where it is registered provides the same facilities to bank companies
registered in Bangladesh as the Government or law of Bangladesh sanctions to bank
companies incorporated outside Bangladesh and the company complies with all the
provisions of this Act applicable to bank companies incorporated outside Bangladesh.

1.25. Cancellation of License of Bank Company

According to section 31(5), The Bangladesh Bank may cancel license granted to Bank Company:
a) if the company stops to carry on banking business in Bangladesh; or,
b) if the company on any occasion fails to comply with any condition referred to under sub-section
(2) of section 3L; or
c) if the company on any occasion fails to comply with any of the conditions referred to under sub-
section (4) of section 31.

Provided that prior to cancelling a license under clause (b) or clause (c) of this sub-section if the
Bangladesh Bank is satisfied that the delay will not be prejudicial to the interest of its depositors, shall
sanction to the company on such terms it may specify an opportunity of taking the necessary steps for
complying with such condition.

According to sub - section (6), any banking company dissatisfied by the decision of the Bangladesh Bank
in canceling a license under this section may within thirty days since the date of communication of such
decision to it may prefer appeal to the Government.

L.26. Restrictions on opening of new, and transfer of existing places of business. (Sec. 32)

(1) Without the previous permission in writing of the Bangladesh Bank

a) no banking company shall open a new place of business in any part of Bangladesh or change
the location of an existing place of business; and

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b) no banking company incorporated in Bangladesh shall open a new place of business outside
Bangladesh or change the location of an existing place of business outside Bangladesh.

(2) The provisions of subsection (1) shall not apply to the opening for a period not exceeding
one month of new places of business for the purpose of offering bank services temporarily
on the occasion of exhibitions, meals, conferences or other like occasions. Provided that
information of such opening is given to the Bangladesh Bank within one week of the date of
opening.

(3) The Bangladesh Bank may, before giving the permission referred to in subsection (1) to any
banking company, require to be satisfied by an inspection under section 44 or otherwise
regarding any subject of that banking company.

L.27. Maintenance of liquid assets

Section 33 sets the following provisions relating to holding of liquid assets:

Every bank company shall preserve in in cash, gold or unencumbered approved
Bangladesh
securities (unencumbered approved securities of bank company shall include its approved
securities lodged with another institution for an advance or any other credit arrangement to the
extent to which such securities have not been drawn against or availed of) the value of which
shall not at the end of any business be less than such percent of the total time and demand
liabilities in Bangladesh as the Bangladesh Bank determine from time to time.

ln calculating the amount provided for in sub-section (1-), any deposit required under the
provision to sub-section (3) of section 13 to be made with the Bangladesh Bank by a bank
company incorporated outside Bangladesh and any balance preserved in Bangladesh by a bank
company in current account with the Bangladesh Bank or its agent or both or in profit and loss
sharing term, deposit account with the Bangladesh Bank shall be deemed to be cash maintained,

The manner of maintaining assets and liabilities and the ratio of class wise maintainable assets
shall be fixed by the Bangladesh Bank.

Every banking company shall, before the close of the month to which the report relates, submit
to the Bangladesh Bank a monthly report in the prescribed form and manner, which shall
contain the following information's, namely:

a) its assets maintained in accordance with this section; and

b) its time and demand liabilities in Bangladesh at the close of each Thursday during the
month, and if any Thursday is a public holiday under the Negotiable lnstruments Act, 188L
(XXVI of 1881), at the close of the proceeding working day.

Where it appears to the Bangladesh Bank that a banking company at any time fails to maintain liquid
assets to the extent determined, that banking company shall be bound to pay for the deficit in the
mentioned assets a fine in form of the highest interest rate taken by the Bangladesh Bank for the
granting of loans.

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t.28. Assets in Bangladesh (Sec 34)

(1) On the close of any working day the assets in Bangladesh of every banking company shall not be
less in value than such amount of its present time and demand liabilities as the Bangladesh Bank
may prescribe by law. Provided that the percentage so determined shall under no circumstances
exceed eighty per cent of those liabilities.

(2) Every banking company shall, before the close of the month succeeding that to which the report
relates, submit to the Bangladesh Bank a report in the prescribed form and manner, which shall
obtain the following particulars, namely: -
a) its assets maintained in accordance with this section;

b) its time and demand liabilities in Bangladesh at the close of every Thursday during a month or
if any Thursday is a public holiday under the Negotiable lnstruments Act, 1881 (XXV| of L881), at
the close of the proceeding working day.

(3) For the purpose of this section

a) all or any of the following bills or securities shall, even if held outside Bangladesh, be deemed
assets in Bangladesh,
i) export bills claimed in Bangladesh or import bills claimed and payable in Bangladesh and
expressed in a currency approved by the Bangladesh Bank; and

ii) securities approved by the Bangladesh Bank:

b) "liabilities in Bangladesh" shall not include the paid-up capital or the reserves or credits
mentioned in the profit and loss account of the banking company.

L.29. Half-yearly report etc.

As per section 36 of Bank Company Act, 1991, every banking company shall submit every half
year, on the thirty first day of December and the thirtieth day of June, a report showing its
assets and liabilities in Bangladesh in the prescribed form and manner to the Bangladesh Bank.

The Bangladesh Bank may, by notice in writing, require banking companies generally, or any
banking company in particular, to furnish it within the time specified therein with statements
and information etc. relating to the banking business including other forms of business the
banking company may be engaged in.

However, the Bangladesh Bank may, without prejudice to the generality of the power granted
under subsection (2), call from time to time for information regarding the investments of a
banking company in industrial enterprises, commerce or agriculture.

1.30. Power to publish information. (Sec 37)

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The Bangladesh Bank may, if it considers it in the public interest so to do, publish in consolidated
form or otherwise any information relating to loans or advances seized under this Act and
outstanding for more than thirty days.

1.31. Accounts and balance sheet.

As per section 38, every banking company incorporated inside or outside Bangladesh shall, in
respect of all business transacted by it and through its branches within that year, prepare a
balance sheet and profit and loss account as well as a financial report as on the last working day
of the year in the forms set out in the first schedule or as near thereto as possible.
The balance sheet, profit and loss account and financial report of any banking company:

a) shall be signed in the case of a banking company incorporated in Bangladesh, by its managing
director or its principal officer and where there are more than three directors of the banking
company, by at least three of those directors, and where there are not more than three
directors, by all of them;

b) shall be signed in the case of a banking company incorporated outside Bangladesh, by the
manager or agent of the principal office of the company in Bangladesh and by another officer
next in seniority to the manager or agent.

Notwithstanding that the forms relating to the submitting of a balance sheet, profit and loss
account and financial report of a banking company differ from the form E of the Third Schedule
of the Companies Act, the provisions of that Act shall, in the case of submitting such balance
sheet, profit and loss account and financial report, be applicable to the extent they are
consistent with the provisions of this Act.

The Bangladesh Bank may amend the forms set out in the First Schedule. However, no less than
three months before such amendment, it gives notice in the official Gazette of its intention so to do.

L.32. Audit.

Section 39 states that the financial statements of a banking company shall be audited in
accordance with the balance sheet prepared under section 38 by a person qualified under the
Bangladesh Chartered Accountants Order, 1973 (P.O. No. 2 of !973), or any other law for the
time being in force to be an auditor of companies and approved by the Bangladesh Bank to be
qualified to audit a banking company.

The auditor referred to in subsection (1) shall have the powers and duties of, and shall be
subject to the obligations and penalties imposed on, auditors of companies by Section 145 of
the Companies Act.

Sub-section (3) of section 39 of Bank Companies Act states that in addition to the affairs which are
under the Companies Act, the auditor of a Bank Company is required to state the following in his
report:

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(a) whether or not the financial statement shows a true picture of profit and loss for the period
concerned.
(b) whether or not the financial statement has been prepared accurately in accordance with the
general accounting procedure.
(c) whether or not the financial statement has been prepared according to the provisions of
relevant existing laws or rules and the instructions issued by the Bangladesh Bank relating to
accou nts.

(d) whether or not sufficient provisions have been made for realization of doubtful advance or
doubtful assets.
(dd) whether or not the limit or repayment of advance or loan fixed by the Bangladesh Bank from
time to time is satisfactory or not.
(e) whether or not the financial statement has been prepared in accordance with the statement
issued by the Bangladesh Bank in consultation with the professional accountants of
Bangladesh.

(f) whether or not the bank company has properly maintained and consolidated all records and
accounts received from its branches.
(g) whether or not the information and explanations asked by the auditor have been found to
be satisfactory.
(h) any other matter which the auditor considers essential to be brought to the notice of the
shareholders of the Bank company.

Section 39(4)states that if an auditor in the course of the performance of his duties as an auditor of
any bank company is satisfied that-

a) there has been serious violation of this Act or serious irregularities have taken place in the
observance of it;

b) out of fraud or dishonesty a criminal offence has been committed;

c) due to loss the capital of the bank company has fallen below 50%.

d) serious irregularities have taken place comprising the irregularities jeopardizing the security
of the creditors in payment of debts or;

e) there is doubt whether the assets of the company is sufficient to meet the claims of the
creditors.

lf so happens, Banks shall without delay report the matter to the Bangladesh Bank informing the
same

1.33. Submission of reports (Sec. 39)

The accounts, balance sheets and reports referred to in section 38 and the auditor's report as

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approved by the Management Board, or as the case may be, by the shareholders in the General
Meeting of the company shall be published in the prescribed manner and three copies of each shall
be furnished to the Bangladesh Bank within three months of the close of the period to which those
accounts, balance sheets and reports relate. However, the Bangladesh Bank may extend the period
for submitting the reports by a further period not exceeding three months.

L,34. Transmission of balance sheets etc. to Registrar

Where a banking company in any year submits its financial report, profit and loss account, balance
sheet and the auditor's report in accordance with the provisions of section 40 it may, when it is a
private company, at the same time send also to the registrar three copies of that balance sheet,
account and report, and where such copies have been sent, it shall not be necessary for the
company to send again copies of that balance sheet, account and report to the registrar as required
by the provisions of section 134 (1) of the Companies Act, and those copies shall be charged with
the fees to be paid in accordance with that section and they shall be deemed in all respects copies
submitted under that section.

1.35. Display of audited balance sheets by banking companies incorporated outside Bangladesh.

According to section 42, every banking company incorporated outside Bangladesh shall also display
a copy of the last balance sheet and profit and loss account prepared under section 38 at any day
proceeding the first Monday of February of the year which follows the year that balance sheet and
account relates to in a conspicuous place in its principal office and every branch office in Bangladesh
and shall keep it uninterruptedly displayed until its subsequent balance sheet and account are
displayed in the same manner.

Every such banking company shall in addition display in like manner copies of its complete audited
balance sheet and profit and loss account relating to its business as soon as they are available and
shall keep the copies uninterruptedly displayed until such subsequent balance sheet and account
are displayed.

1.36. !nspection. (Sec 44)

(1) Notwithstanding anything to the contrary contained in the Companies Act, the Bangladesh Bank
may at any time and, on being directed by the Government, shall, by one or more of its officers,
carry out an inspection of any banking company and its ledgers and accounts and shall, after
such inspection, supply to the banking company a copy of the report prepared on the basis of
that inspection.

(2) Notwithstanding anything to the contrary contained in any other Act in force for the time being,
and without prejudice to the provision of subsection (1), the Bangladesh Bank may at any time,
by one or more of its officers, examine in detail the ledgers and accounts of any banking
company and shall, if requested by the banking company so to do or if considering a proposal to
take any measure against it on the basis of such examination, supply to that banking company a

184 | P *g*
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copy of the report prepared on the basis of that examination

(3) lt shall be the duty of the directors, officers and employees of a banking company or of its
external auditors, to produce, on demand from the person making an inspection under
subsection (1) or an examination under subsection (2), the ledgers, accounts or other
documents of the banking company concerned and all statements and information relating to it
within such time as the inspector or examiner may specify.

(a) The person making an inspection under subsection (1) or an examination under subsection (2)
may examine on oath any director, officer or employee or external auditor of the banking
company concerned with regard to any subject related to that banking company.

(5) The Bangladesh Bank shall, if it has been directed by the Government to carry out an inspection
or examination under this section, and, in any other case, may, after the termination of that
inspection or examination, submit a report thereof to the Government and the Government, if it
is, on consideration of the report, of the opinion that the affairs of the banking company are
being conducted to the detriment of the interests of its depositors, may, after giving reasonable
opportunity to that company to make a representation in connection with that report, by order
in writing,

a) prohibit the banking company from taking fresh deposits; and

b) direct the Bangladesh Bank to apply under section 66 for the winding up of the banking
company

Provided that the Government may defer, modify or annul any order given under this section
upon such conditions as it may think fit to impose.

(6) The Government may, after giving reasonable notice to the banking company concerned,
publish the complete report submitted by the Bangladesh Bank or any portion of it.

(7) Notwithstanding anything contained in any other Act in force for the time being, where a
banking company claims that a report or information requested by any authority other than a
Court or the Bangladesh Bank be secret to such a degree that its submission or publication
would mean to publish information on any of the following subjects, namely:

i) such reserve fund as has not been shown in the balance sheet; or

ii) unrealizable credits or credits the realization of which is doubtful, not shown in it. in that case
the banking company shall not be bound to submit that report or publish that information
unless ordered by a Court or the Bangladesh Bank.

L.37. Power of the Bangladesh Bank to give directions

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According to section 45, it is necessary to issue directions to banking companies generally or to

any banking company in particular, it may issue such direction as it deems fi| and the banking
company concerned shall be bound to comply with such direction where the Bangladesh Bank is

satisfied that:

a) in the public interest, or

b) to provide for the improvement of the monetary policy or banking policy, or

c) to prevent the affairs of any banking company being conducted in a manner detrimental to
the interests of the depositors or in a manner prejudicial to the interests of the banking
company; or

d) to secure the proper management of any banking company,

The Bangladesh Bank may, on representation made to it or on its own motion, cancel or modify any
direction issued under subsection (1); and such cancellation or modification may be subject to any
condition.

1.38. Power of the Bangladesh Bank to remove a director etc. of a banking company

According to section 46 (1) in a case where the Bangladesh Bank is satisfied that it is inevitable to
remove the chairman, director, or chief executive by whatever name called of a bank company in
the interest of the public or to prevent the affairs of a bank company detrimental to the interest of
its depositors or to ensure the proper management of the bank company, the Bangladesh Bank may
for reasons to be recorded in black and white by order remove from office such chairman or director
or the Chief Executive of the bank company.

No person removed from office under sub-section (1) shall be entitled to claim any compensation
for the loss or termination of office (sub-section 5).

However, according to sub section (2), before an order is given, the concerned person or persons
-
shall be given a reasonable opportunity for explanation against the proposed order. But if according
to the opinion of the Bangladesh Bank any delay would be prejudicial to the public interest or the
interest of the bank company or its depositors, the Bangladesh Bank may direct that- the aforesaid
chairman or director or chief executive shall not with effect from the date of the order, act as such
chairman or director or chief executive of the bank company or in any way shall not be concerned
with the management of the bank company. Any person appointed by the Bangladesh Bank in this
behalf shall act as such chairman or director or chief executive of the bank company.

Sub-section (4) states that any person appointed as chairman or director or chief executive under
sub-section (2) shall- hold office during the pleasure of the Bangladesh Bank subject to such
conditions as may be specified in the order of his appointment and for such period, not exceeding
one year as the Bangladesh Bank may specify; and shall not incur any obligation nor liability for
anything which is done in his capacity in the course of discharge of his duties.

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Nothing in this Act shall be applicable to a Chairman, Director, Chief Executive in whatever name is
called nominated by the government (sub-section 6).

1.39. Power of the Bangladesh Bank to dismiss the Board of Directors of a banking company

Section 47 lays down the following rules relating to dissolution of board of directors of a bank

(1) Where the Bangladesh Bank is satisfied that-

a) the activities of the board of directors, by whatever name called, of a bank company is or is
likely to be detrimental to the interest of the bank company or its depositors or otherwise
undesirable; or
b) for all or any of the reasons mentioned in sub-section (L), of section 46, it is necessary to do so,
the Bangladesh Bank may, for reasons to be recorded in writing by order, disclose the Board of
directors of a bank company with effect from such date and for such period as may be specified
in the order.

(2) The period of dissolution specified in and order under subsection (1) may from time to time be
extended by the Bangladesh bank so, however, that the total period of suppression does not
exceed two years.

(3) All powers and duties of the Board of directors shall during the period of dissolution, be
exercised and performed by such person as the Bangladesh Bank may from time to time appoint
in this behalf.

( ) The provisions of sub-section (2), (3), (4) and (5) of section 46 shall, with the necessary
modifications, apply to an order made under this section.

I nteractive Question 6:

Narrate the circumstances under which the Bangladesh Bank can dissolve the board of Directors of
banking company

L.40. Further powers and function of the Bangladesh bank

According to section 49 (t), the Bangladesh Bank may-

a) make caution or prohibit bank companies generally, or any bank company in particular, against
entering into any particular transaction or class of transactions;
b) require bank companies generally, or any bank company in particular, to refrain from taking such
actions as it may specify in relation of any matter relating to the business of such bank company or
companies, or to take such action in relation thereto as the Bangladesh Bank thinks fit;

187 lli ng*

 Corporute Laws and Pructices

c) on a request from the bank companies concerned and subject to the provisions of section 76, assist
as intermediary or otherwise, in proposals for the amalgamation of such bank companies;

d) during the course, after the completion, of any inspection of a bank company under section 44, by
order in writing and on such terms and conditions as may be specified therein

require the bank company to call a meeting of its directors for the purpose of
considering any matter or may direct any officer of it to discuss such matter with an
officer of the Bangladesh Bank,

It. depute its officer to observe the proceedings at any meeting of the Board of directors of
the bank company or of any committee or of any other body constituted by it and
require the bank company to give an opportunity to the officer so deputed to be heard
at such meetings and also require such officer to send a report of such proceedings to
the Bangladesh Bank,

require the Board of Directors of the bank company or any committee or any other body
constituted by it to give in writing to any officer specified by the Bangladesh Bank in this
behalf to his usualaddress all notice of, meeting of the board, committee or other body
constituted by it;

iv appoint its officer to observe the manner in which the affairs or the bank company or its
branches are being conducted,

require the bank company to make within such time as may be specified in the order,
such changes in the management as the Bangladesh Bank may consider necessary in
consequence of the state of affairs disclosed during or by the inspection.

Sub-section (2) requires that the Bangladesh Bank shall make an annual report to the Government on
the trend and progress of banking in the country and in that report suggestion for the strengthening of
banking business throughout the country and the steps required to be taken in that behalf shall be
stated.

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 Corporate Laws and Pructices

2. lllegal banking of companies etc.

2.L. Power to call for certain information etc.

As per section 51 of Bank Company Act, where the Bangladesh Bank thinks that any banking
company or any other person is violating in the course of carrying through a banking business the
provisions of subsection (1) of section 32, it may:

a) within the prescribed time require that company or person, or any person being or, at any time,
having been engaged in or connected with the business of banking, to submit all information,
documents or records within their knowledge, possession, responsibility or charge, which are
related to the abovementioned business;

b) authorize any person to enter and search any place of such company or person, or of any such
person as is or, at any time, has been engaged in or connected with the business of banking, and
to seize all books, account-books, documents and records relating to the banking business
within the possession, charge or responsibility of that person or company, or of any of its
officers or employees.

c) inspect or examine any of the books, account-books, documents or records referred to in clause
b); and it may question any person, officer or employee referred to in that clause;

d) apply, with regard to such company or person, or any person, officer or employee referred to in
clause (b), all powers given to the Bangladesh Bank under subsection (1), (2), (a) and (5) of
section 44.

2.2. Power to make public announcements. (sec 52)

Where the Bangladesh Bank thinks it reasonable to believe that any banking company or any
person referred to in section 51 is violating in the course of carrying through a banking business
the provision of subsection (1) of section 32, it may make a public announcement to this effect.
However, before making such announcement, that company or person shall be given opportunity
to present arguments against the announcement proposed.

Any announcement of the Bangladesh Bank under subsection (1) shall be published in a daily
newspaper and, after such announcement, no company, nor its principal executive officer, nor any
of its directors, managers, officers, employees or agents, nor any other person referred to in
subsection (1), 3) or (4) of section 54 or in section 55 may pretend not to be informed about it.

2.3. Disposal of Cash deposits and assets

According to section 54, a banking company or person relating which an announcement under
subsection (1) of section 52 has been made shall, as fast as possible, deposit all money,
immovable property, shares, possessory titles or other instruments in its possession or
responsibility or under its custody or control or in the possession or responsibility, or under the
custody or control, of anybody being active in its behalf, with a new bank or a person authorized
by it.

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 Corporate Laws and Practices

Where a person referred to in subsection (1) fails to deposit in accordance therewith the money,
immovable property, shares, possessory titles or other instruments within two days after an
announcement under subsection (1) of section 52 has been made, the Bangladesh Bank may
authorize for this purpose any person to enter and search any place and to seize and deposit in
accordance with subsection (1) that money, immovable property and those shares, possessory
titles and other instruments.

The books, account-books, documents, records and assets of any company or person referred to
in subsection (1) of section 52 shall be kept by the public liquidator, public attorney, interim
receiver or public receiver appointed by a court on the basis of an application under section 56, or,
before being relieved of the responsibility of having those books, account-books, documents,
records and assets in possession or under custody.

Whoever is indebted to a company or person referred to in an announcement under subsection

(1) of section 52 shall, within the period extending from the date of publishing such
announcement to the date of ordering the company to be wound up or a court pronouncing a
judgement, pay back his debts in the way laid down in subsection (1-), and inform the Bangladesh
Bank thereof in writing.

2.4. Submission of a report on assets and liabilities to the Bangladesh Bank.

According to section 55, where a public announcement published with regard to a banking company
or a person, the principal executive officer and every director of that company, and the managers,
directors and agents of that company or person, and whoever has a claim against that company or
person, bank shall within three days after the publication of the announcement submit a report to it
on all the assets of that company or person under their custody. However, extended period is
allowed if it is approved by the Bangladesh Bank.

3. Prohibition of certain activities in relation to banking companies

3.1. Punishments for certain activities in relation to banking companies

According to section 57 of Bank Company Act, 1991, whoever violates following activities without
any reasonable excuse shall be punishable with imprisonment of no more than two years or a fine of
no more than twenty thousand Takas or both;

a) obstruct any person from lawfully entering or leaving any office or place of business of a
banking company or from carrying on any business there; or

b) hold, within the office or place of businessof any banking company, any demonstration
which is violent or do anything which obstructs, or is calculated to obstruct, the usual
activities and transactions of the banking company; or

c) act in any manner calculated to undermine the confidence of the depositors in the banking
company.

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 Corporate Luws und Practtces

4. Suspension of business and winding up of banking companies.

4.l.Suspension.

According Bank Company Act 1991, The High Court Division may, on the
to section 64 (1) of
application of a banking company which is temporarily unable to meet its obligations, make an order
staying for a fixed period on such conditions as it may think fit the commencement or continuance
of all proceedings against the company, and a copy of that order shall be forwarded to the
Bangladesh Bank, and the High Court Division may from time to time extend the period. But the
extended period shall not exceed six months.

No application under subsection (1) shall be receivable unless it is accompanied by a report of the
Bangladesh Bank to the effect that the banking company which made the application will be able to
pay its debts:

When an application under subsection (1) is submitted, the High Court Division may appoint a
special officer who shall forthwith take into his custody or under his control all the assets, books,
documents, effects and actionable claims to which the banking company is or appears to be entitled
and shall also exercise such other powers as the High Court may confer on him, having regard to the
interests of the depositors of the banking company.

4.2.Winding up by High Court (Sec. 65)

Notwithstanding anything contained in section 153,'J.62 and27t of the Companies Act, and without
prejudice to the powers given under subsection (1) of section 64, the High Court Division shall under
this section order the winding up of a banking company, if

a) the banking company is unable to pay its debts;

b) the Bangladesh Bank makes an application for its winding up under this section or section 64.

The Bangladesh Bank shall make an application under this section for the winding up a banking
company if it is directed so to do by an order under clause b) of subsection (5) of section 44. The
Bangladesh Bank may make an application under this section for the winding up of a banking
company,

a) if the banking company

i) has failed to comply with the requirements specified under section t3; or

ii) has by reasons of the provisions of section 31 become disentitled to carry on banking
business in Bangladesh;

iii) has been inhibited from receiving fresh deposits

191 lIlnge
 Corporate Laws and Pructices

iv) has failed to comply with any requirement of this Ordinance other than the
requirements laid down in section 13, and after being informed about its failures by a
notice in writing, continues so to do;

v) has contravened any provision of this Ordinance and continues such contravention
beyond such period as may be specified in that behalf by the Bangladesh Bank from
time to time, after notice in writing of such contravention has been conveyed to iU or

b) if in the opinion of the Bangladesh Bank

i) a compromise or arrangement sanctioned by a Court in respect of the banking company

cannot be worked satisfactorily with or without modifications; or

ii) the returns, statements or information furnished to it under or in pursuance of the

provisions of this Ordinance disclose that the banking company is unable to pay its
debts; or

iii) the continuance of the banking company is prejudicialto the interests of its depositors.

Without prejudice to the provisions contained in section 163 of the Companies Act, a banking company
shall be deemed to be unable to pay its debts if:

a) it has refused to meet any lawful demand made at any of its offices or branches within two
working days; or
b) such demand is made elsewhere and the Bangladesh Bank certifies that the banking
company is unable to pay its debts; or
c) the Bangladesh Bank certifies in writing that the banking company is unable to pay its debts.

4.3.Court liquidator

ln accordance with section 66 of Bank Company Act 1991, for the purpose of conducting all
proceedings for the winding up of banking companies and performing such other duties in reference
thereto as the High Court Division may impose, to attach a court liquidator to the High Court
Division, it may, after consultation with the Bangladesh Bank, appoint a court liquidator for such
period as it may determine.

Where there a court liquidator has been appointed under sub-section (1) and an order has been
passed by the High Court Division for the winding up of any banking company, then,
notwithstanding anything contained in section 171. or 175 of the Companies Act, the court liquidator
shall become the official liquidator of the banking company. lf there is existing official liquidator, on
commencement of appointing court liquidator the office of official liquidator be deemed to have
vacated and the vacancy shall be deemed to be filled up by the appointment of the court liquidator
as the official liquidator:

However, where the High Court Division, after giving the court liquidator and the Bangladesh Bank
an opportunity of being heard, is of opinion that the appointment of the court liquidator would be
detrimental to the depositors of the banking company, it may direct the former official liquidator to
continue to act as such.

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 Corporate Laws and Practices

4.4.Appointment of the Bangladesh Bank etc. as liquidator (Sec 67)

Notwithstanding anything contained in section 50, or in section 175 of the Companies Act, where
Bangladesh Bank applies to the High Court Division to appoint the Bangladesh Bank or any individual
as official liquidator in any proceeding for the winding up of a banking company, the application
shall ordinarily be granted and if any liquidator functioning in such proceeding shall vacate office
upon such appointment.

4.5. Submission of a preliminary report by the official liquidator.

As per section 70 of Bank Company Act 1991, the official liquidator shall submit a preliminary report
to the High Court Division within two months from the date of the winding-up order or where the
winding-up order has been made before such commencement, within two months from such
commencement and that report shall contain the following items, namely:

a) the information required by the Companies Act so far as it is available to him;

b) the amount of assets in cash which are in his custody or under his control on the date of the
reporU

c) the amount which is likely to be collected in cash before the expiry of that period of two
months:

However, the High Court Division may, if it thinks fit, in any particular case extend the period of two
months by a further period of one month.

4.5. Notice to preferential claimants etc. (Sec. 71)

(1) Within fifteen days from the date of the winding-up order of a banking company or where the
winding-up order has been made before the commencement of this Act, within one month from
such commencement, the official llquidator shall, for the purpose of making an estimate of the
debts and liabilities of the banking company (other than its liabilities and obligations to its
depositors), by notice served in such manner as the Bangladesh Bank may direct, call upon every
claimant entitled to preferential payment under section 230 of the Companies Act and every
secured and every unsecured creditor of the company to send to him within one month from
the date of the service of the notice a statement of the amount claimed by him.

(2) Every notice under subsection (1) sent to a claimant having a claim under section 230 of the
Companies Act shall state that if a statement of the claim is not sent to the official liquidator
before the expiry of the period of one month from the date of the service, the claim shall not be
treated as a claim entitled to be paid under that section in priority to all other debts, and it shall
be treated as an ordinary debt of the banking company.

(3) Every notice under subsection (1) sent to a secured creditor shall require him to value his
security before the expiry of the period of one month from the date of the service of the notice
and shall state that if he does not send a statement of the claim together with the valuation of
the security before the expiry of the said period, the official liquidator shall himself value the
security and such valuation shall be binding on the creditor,

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(a) lf a claimant or creditor fails to comply with the direction in the notice sent to him under
subsection (L), then

a) in the case of a claimant, his claims will not be entitled to be paid in priority to all other
debts, but shall be treated as an ordinary debt of the banking company;

b) in the case of a creditor, the official liquidator shall himself value the security and such
valuation shall be binding on the creditor.

4.7. Preferential payment to depositors (Sec. 74)

(1) ln every proceeding for the winding-up of a banking company where a winding-up order
has been made, whether before or after the commencement of this Ordinance, within
three months from the date of the winding-up order or where the winding-up order has
been made before such commencement, within three months therefrom, the preferential
payments referred to in section 230 of the Companies Act, in respect of which claims have
been raised in view of, and within one month from the date of the service of the notice
under section 71, shall be made by the official liquidator or adequate provision for such
payment shall be made by him.

(2) ln the case of preferential payments in accordance with the provision of subsection (1), the
procedure shall be as follows, namely: -

a) in the first place, to every depositor in the savings bank account of the banking company
a sum of 2500 Takas or the balance at his credit, whichever is less;

b) in the second place, in order to pay what is due to the creditors of the banking
company, to every other depositor of the company fifty per cent. of the balance at his
credit or 2500 Takas whichever is less:

Provided that the sum total of the amounts paid under clause a) and b) to any one person who
is a depositor in the savings bank account of the banking company and a depositor in any other
account, shall not exceed the sum of 2500 Takas, but this provision shall not apply in the case of
a person who is jointly with any other person depositor in an account.

(3) Where within the period of three months referred to in subsection (1) full payment in cash
cannot be made of the accounts required to be paid under clause a) or b) , the official
liquidator shall pay within that period to every depositor under clause a) or, as the case
may be, clause b) on a pro rata basis so much of the amount due to the depositor with
assets in cash as he is able to do, and the official liquidator shall pay the rest of the amount
to every depositor as and when sufficient assets are collected by the official liquidator in
cas h.

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 Corporate Luws und Pructices

(4) After payments have been made to the depositors in accordance with subsection (1), (2)
and (3), the official liquidator shall pay on a pro rata basis the general creditors with the
assets of the banking company, and he shall then, as and when the assets of the banking
company are collected by him in cash, make payment on a pro rata basis with the collected
assets, of the further sums which are due to the depositors referred to in clause a) and
clause b) of subsection (2).

(5) ln order to enable the official liquidator to have under his control in cash as much of the
assets of the banking company as possible, the securities given to the secured creditors
may be redeemed by the official liquidator

a) where the amount due to the creditor is more than the value of the securities as
assessed by him or, as the case may be, as assessed by the official liquidator, on
payment of such value; and

b) where the amount due to the creditor is equal to or less than the value of the
securities as so assessed, on payment of the amount due:

Provided that where the official liquidator is not satisfied with the valuation made by the
creditor, he may apply to the High Court Division for making a valuation.

(6) When any claimant, creditor or depositor to whom a payment is to be made in accordance
with the provisions of subsection (1), (2), (3), (4) or (5), cannot be found or is not readily
traceable, adequate provision shall be made by the official liquidator for such payment.

{7) For the purpose of this section, the payments specified in each of the following clauses
shall be treated as payments of a different class, namely: -

a) payments to preferential claimants under section 230 of the Companies Act;

b) payments under clause a) of subsection (2) to the depositors in the savings bank
accounU

c) payments under clause b) of subsection (2) to the other depositors;

d) payments to the general creditors;

e) payments to the depositors in addition to those specified in clause a) and clause b) of

subsection (2).

(8) The creditors of each different class referred to in subsection (7) shall rank equally among
themselves and they shall be paid in full where the assets are sufficient so to do; and where
the assets are insufficient, the payments shall abate in equal proportion.

4.8. Restriction on voluntary winding up

As per section 75 of Bank Company Act, no banking company which holds a license granted
under section 31" may be go for voluntarily wound up unless the Bangladesh Bank certifies in
writing that the company is able to pay in full its debts to its creditors.

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4.9. Restriction on compromise or arrangement between banking companies and creditors.

ln accordance with section 76 of Bank Company Act 1991, unless the Bangladesh Bank is of the
opinion that the compromise, arrangement or the amendments therein are capable of being
worked out and are not detrimental to the interests of the depositors of the banking company
concerned, the High Court Division shall not sanction any compromise or arrangement between a
banking company and its creditors or any class of them or between such company and its
members or any class of them.

5. Speedy disposal of winding up proceedings

5.1. Documents of banking company to be evidence.

For speedy disposal of win dining up proceedings, as per section 83, following evidence shall be
kept:

(1) Entries in the books of account or other documents of a banking company which is being
wound up shall be admitted in evidence in all proceedings by or against the banking
company.

(2) All entries contained in the account books or other documents of a banking company may
be proved by production of those account books and documents or copies thereof.
Provided that, in the case of proving such copies, the official liquidator shall confirm that
the copies are true copies of the original entries and that the entries are contained in the
account books or other documents of the banking company in his possession.

(3) Notwithstanding anything to the contrary contained in the Evidence Act, 'J.872 (Act I of
1.8721, all such entries in the account books or other documents of a banking company
shall as against the directors of the banking company in respect of which the winding up
order has been made before the commencement of this Act, be prima facie evidence of
the truth in all matters connected therewith.

5.2. Examination of directors and audit of accounts. (Sec. 84)

1) Where an order has been made for the winding up of a banking company, the official
liquidator shall submit to the High Court Division a report whether in his opinion any loss has
been caused to the banking company since its formation by any act or omission of any person
involved in its formation or of any of its directors or auditors.

2) lf, on consideration of the report submitted under subsection (1), the High Court Division is of
opinion that any person who has taken part in the promotion or formation of the banking
company or has been a director or an auditor of the banking company should be publicly
examined, it shall hold a public sitting on a date it shall determine for that purpose; and it shall
direct that such person, director or auditor shall attend that sitting and shall be examined as

to the formation, promotion and management of the banking company and as to his activities
in connection therewith. Provided that no such person shall be examined unless he has been
given an opportunity to show cause why he should not be so examined.

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3) The official liquidator may take part in such examination and he may, if authorized in this
behalf by the High Court Division, employ any legal expert approved by the said Division.

4) Any creditor or contributor may take part in the said examination either personally or by any
person entitled to appear before the High Court Division.

5) The examination of any person under this section shall be an examination on oath and the
person examined shall answer all such questions as the High Court Division may put or allow
to be put to him.

6) A person ordered to be examined under this section may, at his own cost, employ any person
entitled to appear before the High Court Division; and the employed person may put to the
person exposed to the examination such questions as the High Court Division may deem just
for the purpose of explaining any answer given by the person examined. Provided that if the
person to be examined is, on the opinion of the High Court Division, exculpated from any
charges made or suggested against him, the High Court Division may allow him such costs as it
thinks fit.

7) Notes of the examination shall be taken down in writing, and shall be read over to or by, and
signed by, the person examined, and such notes:

a) may be used in evidence against him in any proceeding, civil or criminal;

b) shall be open to the inspection or copying of any creditor or contributory at all reasonable
times.

8) Where the High Court Division, on examination of the notes obtained by such examination,
whether a fraud has been committed or not, is of opinion that:

a) a person who has been a director of the banking company is not fit to be a director of a
company;

b) a person who has been an auditor of a banking company or a partner of firm acting as
such auditor is not fit to act as an auditor of a company or to be partner of a firm acting as
such auditor; the High Court Division may make an order that that person shall not,
without the leave of the High Court Division, for such period as may be determined in the
order which shall, however, not exceed five years:

i) be a director of any company; or

ii) in any way, directly or indirectly, be concerned or take part in the management of
any company; or

iii) act as an auditor of any company, or be partner of a firm acting as such auditor

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5.3.Special provisions for delinquent directors etc.

As per section 85 of Bank Company Act, Where an application is made by a banking company to the
High Court Division under section 235 of the Companies Act against any of its promoters, directors,
managers, liquidators or officers for restoration of any money or property and the applicant makes
out a prima facie case against such person, the said Division shall make an order against that person
to restore the claimed money or property unless he proves that he is not liable to make the
restoration. Where such an order is made jointly against two or more persons, they shall be jointly
and severally liable to make the restoration of the property or money.

Where an application is made to the High Court Division under section 235 of the Companies Act
and the said Division has reason to believe that a property belongs to any promoter, director,
manager, liquidator or officer of the banking company, whether the property stands in the name of
such person or of any other person as the ostensible owner, direct the attachment of such property
or of such portion thereof as the said Division may think fit

5.4. Duty of directors and officers of banking companies to assist in the realization of property etc.

ln accordance with 86 of Bank Company Act, every director or officer of a banking company shall
give such assistance to the official Iiquidator as he may require in connection with the realization
and distribution of the property of the wound up banking company.

5.5.Appeals. (Sec.90)

1) An appeal shall lie from any order or decision of the High Court Division with the Appeal
Division when the value of the subject-matter of the claim in a civil proceeding under this Act
exceeds fifty thousand Takas.

(2) The High Court Division may by rules provide for an appeal against any order made under
section 87 and the conditions subject to which any such appeal would lie.

(3) Notwithstanding anything contained in any other Act for the time being in force and subject to
the provisions of sub-section (1) and (2), every order or decision of the High Court Division
shall be final and binding for the banking company and all other parties concerned and all
persons claiming through or under them.

5.6. Power to inspect. (Sec. 93)

(1) The Bangladesh Bank may, on being directed so to do by the Government or the High Court
Division, cause the inspection by its officers of a banking company which is being wound up in
total or ofthe balances of any of its books and accounts.

(2) After an inspection under sub-section (1), the Bangladesh Bank shall submit a report of that
inspection to the Government or, as the case may be, to the High Court Division.

(3) lf the Government, on consideration of the report of the Bangladesh Bank, is of opinion that
there has been a substantial irregularity in the winding up proceedings, it may bring such

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irregularity to the notice of the High Court Division for such action as the High Court Division
may think fit.

(4) On receipt of the report of the Bangladesh Bank under sub-section (2) or on any irregularity
being brought to its notice under sub-section (3) the High Court Division may, if it deems fit,
after giving notice to and hearing the Government in regard to that report, give directions.

5.7. Power to call for returns and information (Sec. 94)

The Bangladesh Bank may, at any time by notice in writing, require the liquidator of a banking
company to furnish it, within such time as may be specified in the notice or such further time as the
Bangladesh Bank may allow, any statement or information relating to the winding up of the banking
company and it shall be duty of the liquidator to comply with such requirements.

5.8. Choice for the payment of deposited money (Sec. 103)

(1) Where an individual has, or several persons have jointly deposited money with a banking
company in his or in their name, that individual depositor may separately or, as the case may
be, the group of depositors may jointly, in the way prescribed, choose a person to which, in
the case of the death of the individual depositor or of all of the joint depositors, the deposited
money shall be given. Provided that the said individual depositor or the said group of
depositors may at any time cancel their choice and choose, in the way prescribed, another
person.

(2) The person chosen under sub-section (1) being a minor, the individual depositor or the joint
depositors may, in the prescribed way, direct who shall, in the case of the death of the
individual depositors or of the joint depositors, receive the money during the period of
rninority of the chosen person.

(3) Notwithstanding anything contained in any Act for the time being in force or in any will or any
kind of document regarding the allotment of properties, the person chosen under sub-section
(1) or directed under sub-section (2) shall, after the death of the individual depositor or as the
case may be, of all of the joint depositors, attain all the rights the individual depositor or the
joint depositors had on that deposit, and every other person shall be deprived of those rights.

(4) Where a banking company has made payments in accordance with this section, all its
obligations in respect of the deposit concerned shall be deemed fulfilled

5.9. Giving back of articles deposited in lockers. (Sec. 107)

(1) Where a person has separately rented a locker in the safety vaults or in any other place of a
banking company, the said company shall, in the case of his death, permit the person chosen
by him in advance to open, after his death, as long as the locker is rented, the locker and to
take the bonds back from it.

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(21 Where two or more persons have rented a locker of a banking company jointly and where the
rent agreement contains a provision to the effect that the locker is to use by the joint
signature of two or more renters, those renters by the signature of whom the locker is to be
used may, in the case of the death of one or more renters, choose one or more persons so
that the company may give another person, in place of the deceased ones, the opportunity to
open, together with the living renters, the locker and to take back the articles deposited
therein.

(3) The choices under sub-section (1) or (2) are to be made in the ways prescribed

(4) Before giving back the articles deposited in a locker to any chosen person or, as the case may
be, to any jointly chosen person and the living renters, the banking company shall, in the way
prescribed from time to time by the Bangladesh Bank, prepare a list containing descriptions of
the articles deposited in the locker, take the signature of the said persons and send them a

copy thereof.

(5) Where a banking company has in accordance with the provisions of this section given back
articles deposited in its lockers, all its obligations in respect of the deposited articles
concerned shall be deemed fulfilled.

(6) No suit, complaint nor any other kind of legal proceeding shall be filed or commenced against
a banking company, if any article has been damaged, or appears to have been damaged by
reason of the banking company having consented in accordance with the provisions of sub-
section (1) or sub-section (2) the locker to be opened and the articles deposited therein to be
taken out of it.

5. Miscellaneous

6.1. Punishments.

As per section 109 of the Bank Company Act, l-991, following punishment will be made for
noncompliance of said Act:

1) Whoever carries on the business of banking without holding a license under this Act or
continues to carry on the business of banking after the annulment of his license shall be
punishable with imprisonment for a term which may extend to seven years and shall also be
liable to a fine.

2l lf any person makes, intentionally and knowingly, any false statement or information with
regard to any matter of importance in any account, return, balance sheet or in any other
document or information called for or submitted in accordance with the requirements of, or
under, or for the purpose of, any provision of this Act or holds back, intentionally and knowingly,
any statement or information with regard to such matter, he shall be punishable with
imprisonment for a term which may extend to three years and shall also be liable to a fine.

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3) (3) lf advances are made by a banking company in contravention of the provisions of sub-section
(1) and (2) of section 27, every director or officer of the banking company who is responsible for
the payment of such advances shall be deemed culpable and shall be punishable with
imprisonment for a term which may extend to three years and with a fine not exceeding twenty
thousand Takas.

4) lf any person fails to produce any book, account or other document or to furnish any statement
or information under sub-section (2) of section 44 or to answer any question to any officer
responsible for the carrying out of researches or investigations in matters relating to the
business of banking companies, he shall be punishable with a fine which may extend to two
thousand Takas, and if he persists in such refusal, to a further fine which may extend to one
hundred Takas for every day during which the offence continues, beginning with the first day of
the refusal.

5) lf any deposits are received by a banking company in contravention of an order under clause a)
of sub-section (5) of section 44, every director or officer of the banking company responsible for
the receiving of such deposits shall be deemed culpable of the contravention and shall be
punishable with a fine which may extend to twice the amount of the deposits so received.

6) lf any person fails to comply with the conditions of or to fulfil the duties arising from, any
scheme approved under sub-section (7) of sectionTT,he shall be punishable with a fine which
may extend to two thousand Takas, and if he persists in such failure, to a further fine which may
extend to one hundred Takas for every day during which the offence continues, beginning from
the first day of the failure.

7) lf any person contravenes any other provision of this Act, or any order or direction given, or any
condition imposed, or any rule made thereunder, he shall be punishable for that contravention
with a fine which may extend to two thousand Takas, and if he persists in such contravention, to
a further fine which may extend to one hundred Takas for every day during which the offence
continues, beginning with the first day of the contravention.

6.2. Chairmen, directors etc. of a banking company to be public servants (Sec. 110)

The chairmen, directors, auditors, liquidators, managers and other officers and employees of a banking
company shall be deemed public servants in the sense this term is used in section 21 of the penal Code,
1860 (Act XLV of 1860).

6.3. Bangladesh Bank to take punitive measures (Sec. 112)

lf the Bangladesh Bank intends, in the case of offences not cognizable by a court, to take punitive
measures against a banking company for contravention of any section under this Ordinance, it may,
after carrying out, in the way prescribed by-law, an investigation and giving reasonable opportunity for a
hearing to the banking company concerned, impose a legal penalty,

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6.4. Restriction on acceptance of deposits withdrawable by cheque

As per section 115, no person other than a banking company or the Bangladesh Bank or any banking
institution, firm or other person notified, after consultation with the Bangladesh Bank, by the
Government in this behalf shall accept deposits withdrawable by cheque. However, nothing contained in
this section shall apply to any savings bank scheme run by the Government.

6.5. Restriction on the change of name by a banking company

ln accordance with Section 116 of Bank Company Act, notwithstanding anything contained in section 1L
of the Companies Act, the Government shall not signify its approval to the change of name of any
banking company unless the Bangladesh Bank certifies in writing that it has no objection to such change.

6.6. Alteration of memorandum of a banking company

According to section 1"17, notwithstanding anything contained in the Companies Act, no application for
the alteration of the memorandum of articles of a bank company shall be maintainable unless the
Bangladesh Bank certifies that there is no objection to such alteration.

lnteroctive Question 7 :

A bank company starts its business only after getting license from Bangladesh Bank and operates under
Bank Companies Act, L991, though it was initially registered as a Company with the Joint Stock Registrar
of Companies and Firms under Companies Act 1994, A Bank Company has to follow Companies Act,
1994 as well as Banking Companies Act, 1991. lf a bank company requires to alter its memorandum,
which of the acts is to be followed and why?

6.7. Exchange of information (Sec. 119)

Banking companies may, directly or indirectly, exchange information on their customers, subject to the
observation of strict secrecy.

6.8. Protection of action taken in good faith.

As per section 122 of Bank Company Act 1991, no suit or other legal proceeding shall lie against the
Government or the Bangladesh Bank or against any of its officers or employees for anything which is in
good faith done or intended to be done under this Act, or for any damage caused or likely to be caused
by anything intended to be done in good faith.

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7. lmportant circulars for Bank Companies:

8.1. BRPD Circular No. 14: Master Circular on Loan Classification and Provisioning:

Bangladesh Bank has, over the last several years, positioned the banks on a path towards higher
regulatory capital ratios and a more precise calculation of each individual bank's need for capital,
through a gradual implementation of internationally recognized capital standards. The enforcement of a
stricter regulatory capital regime also requires measures to improve the accuracy of financial data which
are used internally, stated in the audited financial statements and reported to Bangladesh Bank as per
rules. For both the bank's managerial and Bangladesh Bank's supervisory purposes, as well as for
accurate valuation of a bank's capital in all of its financial reports are necessary.

An accurate valuation of capital relies, in turn, on an accurate valuation of assets. Loan-loss provisioning
- the recognition that some or all of the required payments on a loan may never be made - is the single
most important aspect of asset valuation to bankers and bank supervisors. lt is important because loans
typically make up 50%or more of the totalassets of the bank. Basel lland Basel llldevote a great dealof
attention to the distinction between "expected losses" and "unexpected losses" on the bank's loan
portfolio. The purpose of provisioning is to take into account expected losses. Expected losses can be
assigned to loans based on a loan classification system, which has been utilized in Bangladesh for many
years and is being updated with this circular.

Bangladesh Bank also wishes to stress that it is the responsibility of bank management to adopt and
implement proper accounting and reporting, and that correct classification and provisioning is a part of
that responsibility. Loan classification and provisioning must be a key component of a regular internal
loan review process that looks at the current likelihood that the borrower will repay. The value of the
formed allowance that results from the provisioning process should reflect all expected losses resulting
from credit exposures.

Bangladesh Bank has established requirements for general loan loss provisions, in certain percentages,
for certain categories of loans that are unclassified or in the Special Mention Account. As the name
suggests, general provisions are assigned to take into account the expected losses on pools of loans that
are thought to have similar characteristics. The characteristics of each individual loan are not analyzed.
Put differently, it is not known or even assumed which loan or loans in the pool are going to result in
loan losses; it is simply taken as given that in such large pools, even those currently unclassified, there
will undoubtedly be individual loans that in the future will not be repaid. ldeally, the percentages of
provision that are applied to each pool are determined based on historical loss experience of similar
loan pools. Banks are encouraged to calculate these historical loss experiences on the loan pools for
which Bangladesh Bank has indicated general provision percentages, and use these data if they result in
higher provisions than are required in this circular. Because general provisions are not formed based on
expectations of loss on any individual loan, they are allowed to be included in the calculation of Tier 2
capital, subject to some restrictions. ln contrast, specific provisions (established on loans that are

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classified as Sub-standard, Doubtful or Bad/Loss)are set up on a loan-by-loan basis after careful analysis
of each individual loan's probability of repayment. For loans placed into any of these classification
categories, weaknesses have been identified that cast doubt on the borrower's ability or intent to make
all contractual payments in a timely manner. For this reason, specific provisions are not allowed to be
included in the calculation of Tier 2 capital.

8.1.1. Categories of Loans and Advances

All loans and advances will be grouped into four (4) categories for the purpose of classification, namely-
(a) Continuous Loan (b) Demand Loan (c) Fixed Term Loan and (d) Short-term Agricultural & Micro-
Credit.

a) Continuous Loan: The loan accounts in which transactions may be made within certain limit and
have an expiry date for full adjustment will be treated as Continuous Loan. Examples are: Cash
Credit, Overdraft, etc.

b) Demand Loan: The loans that become repayable on demand by the bank will be treated as Demand
Loan. lf any contingent or any other liabilities are turned to forced loan (i.e. without any prior
approval as regular loan) those too will be treated as Demand Loan. Such as: Forced Loan against
lmported Merchandise, Payment against Document, Foreign Bill Purchased, and lnland Bill
Purchased, etc.

c) Fixed Term Loan: The loans, which are repayable within a specific time period under a specific
repayment schedule, will be treated as Fixed Term Loan.

d) Short-term Agricultural & Micro-Credit: Short-term Agricultural Credit will include the short-term
credits as listed under the Annual Credit Program issued by the Agricultural Credit and Financial
lnclusion Department (ACFID)of Bangladesh Bank. Credits in the agriculturalsector repayable within
12 (twelve) months will also be included herein. Short-term Micro- Credit will include any micro-
credits not exceeding an amount determined by the ACFID of Bangladesh Bank from time to time
and repayable within 12 (twelve) months, be those termed in any names such as Non-agricultural
credit, Self-reliant Credit, Weaver's Credit or Bank's individual project credit.

8.1.2. Basis for Loan Classification:

a) Objective Criteria:

(1) Past Due/Over Due:

(i) Any Continuous Loan if not repaid/renewed within the fixed expiry date for repayment or
after the demand by the bank will be treated as past due/overdue from the following day
of the expiry date.

(ii) Any Demand Loan if not repaid within the fixed expiry date for repayment or after the
demand by the bank will be treated as past due/overdue from the following day of the
expiry date.

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 Corporate Laws und Pructices

(iii) ln case of any installment(s) or part of installment(s) of a Fixed Term Loan is not repaid
within the fixed expiry date, the amount of unpaid installment(s) will be treated as past
due/overdue from the following day of the expiry date.

(iv) The Short-term Agricultural and Micro-Credit if not repaid within the fixed expiry date for
repayment will be considered past due/overdue after six months of the expiry date.

(2) All unclassified loans other than Special Mention Account (SMA) will be treated as Standard

(3) A Continuous loan, Demand loan or a Term Loan which will remain overdue for a period of 02
(two) months or more, will be put into the "Special Mention Account(SMA)". This will help banks
to look at accounts with potential problems in a focused manner and it will capture early
warning signals for accounts showing first sign of weakness. Loans in the "Special Mention
Account (SMA)" will have to be reported to the Credit lnformation Bureau (ClB) of Bangladesh
Bank.

(4) Loans except Short-term Agricultural & Micro-Credit in the "special Mention Account" and "Sub-
Standard" will not be treated as defaulted loan for the purpose of section 27KaKa(3) [read with
section 5(GaGa)l of the Banking Companies Act, 1991.

(5) Any continuous loan will be classified as:

i. 'Sub-stondord'if it is past due/overdue for 03 (three) months or beyond but less than 06
(six) months.

ii. 'Doubtful' if it is past due/overdue for 06 (six) months or beyond but less than 09 (nine)
months

iii. 'Bod/Loss'if it is past due/overdue for 09 (nine) months or beyond.

(6) Any Demand Loan will be classified as:

'Sub-standord' if it remains past due/overdue for 03 (three) months or beyond but not
over 06 (six) months from the date of expiry or claim by the bank or from the date of
creation of forced loan.

'Doubtful' if it remains past due/overdue for 06 (six) months or beyond but not over 09
(nine) months from the date of expiry or claim by the bank or from the date of creation of
forced loan.

ilt 'Bod/Loss'if it remains past due/overdue for 09 (nine) months or beyond from the date of
expiry or claim by the bank or from the date of creation of forced loan.

(7) ln case of any installment(s) or part of installment(s) of a Fixed Term Loan is not repaid within
the due date, the amount of unpaid installment(s) will be termed as 'past due or overdue
installment'. ln case of Fixed Term Loans: -

2051F*g*
 Corporate Laws and Practices

t. lf the amount of past due installment is equal to or more than the amount of
installment(s) due within 03 (three) months, the entire loan will be classified as "Sub-
standard".

lf the amount of past due installment is equal to or more than the amount of
installment(s) due within 06 (six) months, the entire loan will be classified as "Doubtful".

Ilt lf the amount of 'past due installment is equal to or more than the amount of
installment(s) due within 09 (nine) months, the entire loan will be classified as "Bad/Loss".

Explanation: lf any Fixed Term Loan is repayable on monthly installment basis, the amount of
installment(s) due within 06 (six) months will be equal to the sum of 06 monthly installments. Similarly,
if the loan is repayable on quarterly installment basis, the amount of installment(s) due within 06 (six)
months will be equal to the sum of 2 quarterly installments.

(8) The Short-term Agricultural and Micro-Credit will be considered irregular if not repaid within the
due date as stipulated in the loan agreement. lf the said irregular status continues, the credit
will be classified as 'Substandard ' after a period of 12 months, as 'Doubtful' after a period of 36
months and as 'Bad/Loss' after a period of 60 months from the stipulated due date as per the
loan agreement.

b) Qualitative Judgement:
lf any uncertainty or doubt arises in respect of recovery of any Continuous Loan, Demand Loan or
Fixed Term Loan, the same will have to be classified on the basis of qualitative judgement be it
classifiable or not on the basis of objective criteria. lf any situational changes occur in the
stipulations in terms of which the loan was extended or if the capital of the borrower is impaired
due to adverse conditions or if the value of the collateral decreases or if the recovery of the loan
becomes uncertain due to any other unfavorable situation, the loan will have to be classified on the
basis of qualitative judgement.

Despite the probability of any loan being affected due to the reasons stated above or for any other
reasons, if there is any hope for change of the existing condition by resorting to proper steps, the
loan, on the basis of qualitative judgement, will be classified as 'Sub-standard '. But even after
resorting to proper steps, there exists no certainty of total recovery of the loan, it will be classified
as' Doubtful 'and even after exerting the all-out efforts, there exists no chance of recovery, it will
be classified as ' Bad/Loss ' on the basis of qualitative judgement.

For incorporating qualitative judgment, banks must focus on the likelihood that the borrower will
repay all amounts due in a timely manner, using their own judgment and the following assessment
factors:

(1) Specia! Mention

i. Assets must be classified no higher than Special Mention if any of the following
deficiencies of bank management is present: the loan was not made in compliance with

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the bank's internal policies; failure to maintain adequate and enforceable documentation;
or poor control over collateral.

il, Assets must be classified no higher than Special Mention if any of the following
deficiencies of the obligor is present: occasional overdrawn within the past year, below-
average or declining profitability; barely acceptable liquidity; problems in strategic
planning.

(2) Sub-standard
Assets must be classified no higher than Sub-standard if any of the following deficiencies
of the obligor are present: recurrent overdrawn, low account turnover, competitive
difficulties, location in a volatile industry with an acute drop in demand; very low
profitability that is also declining; inadequate liquidity; cash flow less than repayment of
principal and interesU weak management; doubts about integrity of management; conflict
in corporate governance; unjustifiable lack of external audit; pending litigation of a
significant nature.

ii Assets must be classified no higher than Sub-standard if the primary sources of repayment
is insufficient to service the debt and the bank must look to secondary sources of
repayment, including collateral.

ilt Assets must be classified no higher than Sub-standard if the banking organization has
acquired the asset without the types of adequate documentation of the obligor's net
worth, profitability, liquidity, and cash flow that are required in the banking organization's
lending policy, or there are doubts about the validity of that documentation.

(3) Doubtful

Assets must be classified no higher than Doubtful if any of the following deficiencies of the
obligor is present: permanent overdrawn; location in an industry with poor aggregate earnings
or loss of markets; serious competitive problems; failure of key products; operational losses;
illiquidity, including the necessity to sell assets to meet operating expenses; cash flow less than
required interest payments; very poor managemen| non-cooperative or hostile managemenq
serious doubts of the integrity of management; doubts about true ownership; complete absence
of faith in financial statements.

(4) Bad/Loss

Assets must be classified no higher than Bad/Loss if any of the following deficiencies of the
obligor are present: the obligor seeks new loans to finance operational losses; location in an
industry that is disappearing; location in the bottom quartile of its industry in terms of
profitability; technological obsolescence; very high losses; asset sales at a loss to meet
operational expenses; cash flow less than production costs; no repayment source except
liquidation; presence of money laundering, fraud, embezzlement, or other criminal activity; no
further support by owners.

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c) Improvement in Classification:

From time to time, in the judgment of the bank, the condition of a loan may improve and it may be
justified to move it to a more favorable classification category. The decision to move a loan to a
more favorable classification category must be accompanied by analysis showing that there has
been improvement in the payment performance of the loan and/or in the financial condition of the
borrower. The decision to move a loan from Bad/Loss to Doubtful or Substandard, or from Doubtful
to Substandard, may, with appropriate justification, be taken by the Chief Credit Officer, with the
concurrence of the Chief Financial Officer. The decision to move a loan from Substandard, Doubtful,
or Bad/Loss to Special Mention Account or to declassify it completely must be taken by the Board of
Directors, with appropriate justification presented by the branch manager who originated the loan
in question and the Managing Director.

A bank may request the concerned Department of Banking lnspection of Bangladesh Bank to review
the classification of any loan for which there is a disagreement on classification that is not resolved
during the on-site inspection. Bangladesh Bank will respond to the bank within 3.5 days of receiving
such request. However, in any case where there is a lingering disagreement between the
classification determined by bank management and the classification determined by Bangladesh
Bank, the judgment of Bangladesh Bank will prevail. Any loan classified during Bangladesh Bank's
on-site inspection on the basis of qualitative judgement cannot be declassified without the consent
of Bangladesh Bank.

8.1.3. Accounting of the Interest of Classified Loans:

lf any loan or advance is classified as 'Sub-standard' and 'Doubtful', interest accrued on such loan will be
credited to lnterest Suspense Account, instead of crediting the same to lncome Account. ln case of
rescheduled loans, the unrealized interest, if any, will be credited to lnterest Suspense Account, instead
of crediting the same to lncome Account.

As soon as any loan or advance is classified as 'Bad/Loss', charging of interest in the same account will
cease. ln case of filing a law-suit for recovery of such loan, interest for the period till filing of the suit can
be charged in the loan account in order to file the same for the amount of principal plus interest. But
interest thus charged in the loan account has to be preserved in the'lnterest Suspense'account. lf any
interest is charged on any'Bad/Loss'account for any other special reason, the same will be preserved in
the'lnterest Suspense'account. lf classified loan or part of it is recovered i.e., real deposit is effected in
the loan account, first the interest charged and accrued but not charged is to be recovered from the said
deposit and the principalto be adjusted afterwards.

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 Corporate Laws and Pructices

8.1.4. Maintenance of Provision:

a) General Provision: Banks will be required to maintain General Provision in the

following way:

(1) @ 0.25% against all unclassified loans of Smalland Medium Enterprise (SME)as defined bythe
SME & Special Programs Department of Bangladesh Bank from time to time and @ 1% against
all unclassified loans (other than loans under Consumer Financing, Loans to Brokerage House,
Merchant Banks, Stock dealers etc., Special Mention Account as well as SME Financing.)

(2) @ 5% on the unclassified amount for Consumer Financing whereas it has to be maintained @
2% on the unclassified amount for (i) Housing Finance and (ii) Loans for Professionals to set up
business under Consumer Financing Scheme.

(3) @ 2% on the unclassified amount for Loans to Brokerage House, Merchant Banks, Stock
dealers, etc.

(41 @ 5% on the outstanding amount of loans kept in the 'Special Mention Account'.

(5) @!%on the off-balance sheet exposures. (Provision will be on the totalexposure and amount
of cash margin or value of eligible collateral will not be deducted while computing Off-balance
sheet exposure.)

b) Specific Provision: Banks will maintain provision at the following rates in respect of classified
Continuous, Demand and Fixed Term Loans:

(L) Sub-standard: 20%

(2)Doubtful: 50%
(3) Bad/Loss: 100%

c) Provision for Short-term Agricultural and Micro-Credits:

(1) AII credits except 'Bad/Loss' (i.e. 'Doubtful', 'Sub-standard', irregular and regular credit
accounts): 5%

(2) 'Bad/Loss': 100%

8.1.5. Base for Provision:

For eligible collaterals of the following types, provision will be maintained at the stated rates in para 4
on the outstanding balance of the classified loans less the amount of lnterest Suspense and the value of
eligible collateral:

a. Deposit with the same bank under lien against the loan,

b. Government bond/savings certificate under lien,

c. Guarantee given by Government or Bangladesh Bank.

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 Corporate Laws and Pructices

For all other eligible collaterals, the provision will be maintained at the stated rates in Para 4 on the
balance calculated as the greater of the following two amounts:

i, outstanding balance of the classified loan less the amount of lnterest Suspense and the
value of eligible collateral; and

ii. 15% of the outstanding balance of the loan.

However, the base for provision shall be further reviewed towards closer convergence with
international best practice standards.

8.1.5. Eligible Collateral:

ln the definition of 'Eligible Collateral' as mentioned in the above paragraph the following collateral will
be included as eligible collateral in determining base for provision:

-1,00% of deposit under lien against the loan

-100% of the value of government bond/savings certificate under lien

-100% of the value of guarantee given by Government or Bangladesh Bank

-100% of the market value of gold or gold ornaments pledged with the bank.

- 50% of the market value of easily marketable commodities kept under control of the bank

- Maximum 50% of the market value of land and building mortgaged with the bank

- 50% of the average market value for last 06 months or 50% of the face value, whichever is less,

of the shares traded in stock exchange

Determination of Market Value of Eligible Collateral:

ln determining market value of easily marketable commodities, land and building, banks are advised to
follow the instructions mentioned below:
(a) Easily marketable goods will mean pledged, easily encashable/ saleable goods that remain
under full control of the bank. However, while the concerned bank branch official will
conduct periodic inspection to verify as to whether requirements have been met such as
the suitability of goods for use, expiry period, appropriateness of documentary evidences,
and up to date insurance cover, the same will have to be assessed by the professional
assessor from time to time.

(b) For land and building, banks will have to ensure whether title documents are in order and
concerned land and building will have to be valued by the professional valuation firm
along with completion of proper documentation in favor of the bank. ln the absence of a

professional valuation firm, a certificate in favor of such valuation will have to be collected
from a specialized engineer. Nevertheless, temporary houses including tin-shed structure
shall not be shown as building.

(c) ln order to facilitate the on-site inspection by Bangladesh Bank's Department of Banking
lnspection, banks are also advised to maintain a complete statement of eligible collateral on a
separate sheet in the concerned loan file. lnformation such as a description of eligible collateral,

2l0 lrrgi:
 Corporate Laws and Practices

their assessment by a recognized firm, marketability of the commodity, control of the bank, and
reasons for considering eligible collateral etc. will have to be included in that sheet.

8.2. BRPD Circular No. 15 incorporating changes by BRPD Circular No. 06: Loan Rescheduling:

Bangladesh Bank recognizes that in some cases, a legitimate banking practice may allow for the renewal
of a continuous loan or line of credit. Occasionally, even a term loan is renewed or extended under
unfortunate circumstances that are beyond the control of the borrower and do not signify that the
borrower's willingness or ability to repay has deteriorated the loan. However, Bangladesh Bank is
concerned that rescheduling (also known as "prolongation" or ever greening") may sometimes result in
an overstatement of capital, when loans that have a low probability of repayment are carried at full
value on banks' balance sheets. Bangladesh Bank is hereby issuing this circular in order to communicate
its policy stance that rescheduling should be done only in limited circumstances and under restrictions.

8.2.1. Guidelines for considering application for loan rescheduling:

Banks shall comply with the following instructions while considering application for loan rescheduling of
non-performing loan (loans classified as sub-standard, Doubtful and Bad/Loss):

a) The bank must have a policy approved by its Board of Directors in place that defines the
circumstances and conditions under which a loan may be rescheduled, consistent with this circular.
These conditions may be stricter than those contained in this circular and cannot be lenient in any
case. The policy must include controls to avoid the routine rescheduling and repeat rescheduling of
loans in those cases where borrowers are experiencing financial difficulty or there is doubt that the
full amount of the loan will be recovered. ln particular, the policy should place strict limits, or even
prohibit, rescheduling of loans to business enterprises in unproductive sectors, or unprofitable
business enterprises in productive sectors. lf exceptions are made for certain sectors/business
enterprises that do not meet the above guidelines, those sectors/business enterprises should be
identified in the policy and a justification for rescheduling should be given.

b) when a borrower asks for rescheduling of loan, the bank shall meticulously examine the causes as
to why the loan has become non-performing. lf it is detected from such review that the borrower
has diverted funds elsewhere or the borrower is a habitual loan defaulter, the bank shall not
consider the application for loan rescheduling and shall take/continue all legal steps for recovery
of
the loans.

c) lf a borrower while applying for rescheduling, pays the required down payment in cash at a time,
the bank must address the application within 03 (three) months upon receipt. lf the borrower
gives any cheque, pay order or any other instrument against down payment,
the bank must ensure
encashment of such instrument before processing of the rescheduling case. Any previous payment
from time to time shall not be treated as a down payment.

d) Banks while considering loan rescheduling, must consider overall repayment capability
of the
borrower taking into account the borrower's liability position with other banks and financial
institutions.

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 Corporute Luws und Practices

e) Banks shall review the borrower's cash flow statement, audited balance sheet, income statement
and other financial statements in order to ensure whether the borrower would be able to repay the
rescheduled installments/existing liability or not.

f) lf required, bank officers shall conduct spot inspections of the borrower's company/business place
to ensure that the concerned company/business enterprise would be able to generate a surplus to
repay the liability of rescheduling. Banks shall preserve such reports in their branches for
Bangladesh Bank's inspection.

g) lf a bank is satisfied after due diligence as mentioned above that the borrower will be able to repay,
the loan may be rescheduled. Otherwise, bank shall take all legal steps to realize the loan and make
necessary provision.

h) Rescheduling of any loan must be justified in written statement by the bank's Credit Committee.
The statement must give reasons why the rescheduling is beneficial to the long run profitability and
capital adequacy of the bank, including the factors that cause the Credit Committee to believe that
the loan will ultimately be repaid in full. The statement must also explain the impact of this
rescheduling on the bank's liquidity position and the needs of other customers.

8.2.2. Time limit for rescheduling:

The rescheduling shall be for a minimum reasonable period of time. Time limit for rescheduling of
different categories of loans will be as follows:
(Note: These time limits are absolute maximums only, and banks are encouraged to establish shorter
time limits in their internal policies. Each loan that is being considered for rescheduling should be
evaluated on its own merits and not automatically rescheduled for the maximum time period or
rescheduled for the maximum number of three (03) times.)

a) Time limit for rescheduling Continuous Loan: The loan account in which transactions may be made
within certain limit and have an expiry date for full adjustment will be treated as Continuous Loan:

Frequency Classified as Sub- Classified as Doubtful Classified as Bad/Loss

standard
First Rescheduling Maximum 18 Maximum 12 (twelve) Maximum 12 (twelve)
(eighteen) months months from the date months from the date
from the date of of rescheduling of rescheduling
rescheduling
Second Rescheduling Maximum 12 (twelve) Maximum 09 (nine) Maximum 09 (nine)
months from the date months from the date months from the date
of rescheduling of rescheduling of rescheduling
Third Rescheduling Maximum 06 (six) Maximum 06 (six) Maximum 06 (six)

months from the date months from the date months from the date
of rescheduling of rescheduling of rescheduling

2I2ll'i:;t:
 Corporate Laws und Practices

Conditions: During the rescheduled period all required principal and interest payments must be made.
Rescheduled amount should be repaid in monthly installments. lf the amount of defaulted installments
is equal to the amount of 3(monthly) installments, the loan will be classified as Bad/Loss.

b) Time limit for rescheduling Demand Loan: The loan which becomes repayable on demand by the
bank is treated as Demand Loan. lf any contingent or any other liabilities are turned to forced loan
(i.e. without any prior approval as regular loan) those too will be treated as Demand Loans

Frequency Classified as Sub- Classified as Doubtful Classified as Bad/Loss

standard
First Rescheduling Maximum 1"2 (twelve) Maximum 09 (nine) Maximum 09 (nine)
months from the date months from the date months from the date
of rescheduling of rescheduling of rescheduling
Second Rescheduling Maximum 09 (nine) Maximum 06 (six) Maximum 06 (six)
months from the date months from the date months from the date
of rescheduling of rescheduling of rescheduling
Third Rescheduling Maximum 06 (six) Maximum 06 (six) Maximum 06 (six)
months from the date months from the date months from the date
of rescheduling of rescheduling of rescheduling

Conditions: During the rescheduled period all required principal and interest payments must be made.
Rescheduled amount should be repaid in monthly installments. lf the amount of defaulted installments
is equal to the amount of 3(monthly) installments, the loan will be classified as Bad/Loss.

c) Time limit for rescheduling Fixed Term Loan: The loan which is repayable within a specified time
period under a prescribed repayment schedule is treated as Term Loan

Frequency Classified as Sub- Classified as Doubtful Classified as Bad/Loss

standard
First Rescheduling Maximum 36 (thirty Maximum 24 (twenty Maximum 24 (twenty
six) months four) months four) months
Second Rescheduling Maximum 24 (twenty Maximum 18 Maximum 18
four) months (eighteen) months (eighteen) months
Third Rescheduling Maximum 12 (twelve) Maximum 12 (twelve) Maximum 12 (twelve)
months months months

Conditions: During the rescheduled period all required principal and interest payments must be made.
Rescheduled amount should be repaid in monthly/quarterly installments. lf the amount of defaulted
installments is equal to the amount of 6 monthly or 2 quarterly installments, the loan will be classified as
Bad/Loss."

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 Corporute Laws and Practices

d) Time limit for rescheduling for Short-term Agricultural and Micro-Credit

First Rescheduling Repayment time limit for rescheduling should not exceed 2 (two) years
from the date of rescheduling
Second Rescheduling Maximum 1(one) year from the date of rescheduling.
Third Rescheduling Maximum 6(six) months from the date of rescheduling.

e) lf the loan becomes default after third rescheduling, the borrower will be treated as a habitual loan
defaulter and the bank shall not consider for further loan rescheduling.

f) Approval of loan rescheduling cannot be made below the level at which it was originally
sanctioned. A detailed appraisal report including implications of such loan rescheduling on the
income and other areas of the bank must be placed to the approving authority at the time of
placing the rescheduling proposal.

8.2.3. Down payment of term loans:

a) Application for first time rescheduling will be taken into consideration upon receiving cash payment
of at least t5% of the overdue installments or 10% of the total outstanding amount of loan,
whichever is less;

b) Application for second time rescheduling will be considered upon receiving cash payment of
minimum 30% of the overdue installments or 2O% of the total outstanding amount of loan,
whichever is less.

c) Application for rescheduling third time will be considered upon receiving cash payment of
minimum 50% of the overdue installments or 30% of the total outstanding amount of loan,
whichever is less.

d) The rate of down payments for Short-term Agricultural and Micro-Credit will be same as above.

Explanation: lf any loan is rescheduled for one time before issuance of this circular, the conditions set
forth in this circular for second time rescheduling of such loans shall be applicable. Likewise, the terms
for third time rescheduling as per this circular for rescheduling of any loan, which has already been
rescheduled twice or more shall be applicable

8.2.4. Down payment of demand and continuous loan:

a) lf a Demand or Continuous Loan is converted into first rescheduling may take place
a Term loan,
against down payment on the basis of loan amount in the following manner.

Amount of Overdue Loan Rate of Down payment

Up to Tk.1.00 (one) crore 15%

Above Tk.1.00(one) crore and up to Tk.5.00 1.0%

(five) crore (but not less than Tk.15.00 lac)

Above Tk. 5.00(five) crore s%
(but not less than Tk.50.00 lac)

2l4lY'a*t
 Corporate Laws and Practices

Application for rescheduling will be taken into consideration only after the amount for the down
payment is paid in cash as narrated in 01(c).

b) lf any Continuous or Demand Loan is rescheduled for the second time (first time after being
converted partly or wholly into Term Loan) and the repayment installments are fixed, the
application for rescheduling of such loans shall be considered upon receiving cash payment of
minimum 30% of the overdue installments or 20% of the total outstanding amount of loan,
whichever is less. Similarly, for third rescheduling (second time after being converted partly or
wholly into Term Loan) minimum 50% of the overdue installments or 30% of the total outstanding
amount of loan, whichever is less, shall have to be repaid in cash.

8.2.5. Classification and interest suspense of rescheduled loans:

Rescheduled loans may be put into any category of classification by the bank considering the existing
financial soundness and repayment capacity of the borrower, subject to the accumulated amount in
interest suspense account not being taken into income account, unless actually realized. Upon
classification, applicable provisions have to be maintained, according to the Master Circular: Loan
Classification and Provisioning (BRPD Circular No. 1,4/2012). These classifications will be reviewed by
Bangladesh Bank inspectors. However, regardless of the classification category into which the loan is
placed by the bank, a rescheduled loan will not be considered a "defaulted loan," and the borrower will
not be considered a "defaulted borrower" as these terms are understood in the context of section
27KaKa(3) [read with section 5(GaGa)] of the Banking Companies Act, 1991, unless such loan has not
been repaid after reaching the maximum number of allowable rescheduling. lnterest accrued on
rescheduled loans will be subject to the accounting treatment that is appropriate for the classification
category of the loan, in line with the Master Circular: Loan Classification and Provisioning (BRPD Circular
No.1.4/201,2)just as if the loan had not been rescheduled.

8.2.5. New loan facility after rescheduling:

a) The borrower whose credit facility has been rescheduled may avail a new loan facility or enhance
existing credit facility subject to fulfillment of the following conditions: -

i. The borrower must pay at least 1,5% of the "Outstanding Balance" (outstanding amount after
excluding the down payment on rescheduling) to avail any further credit facility from the
rescheduling bank. ii. ln case of borrowing from other banks, the same rule will be applicable,
i.e. the borrower must pay at least 1,5% of the "Outstanding Balance" (outstanding amount
after excluding the down payment on rescheduling), then, will be allowed to take regular
facility from other banks subject to the submission of No Objection Certificate (NOC) from the
rescheduling bank or financial institution.

b) Exporters may be granted further credit facility (after being identified as not-a-willful defaulter), if
required, subject to settling at least 75% of the "Outstanding Balance" (outstanding amount after
excluding the down payment on rescheduling). They will be allowed to take the regular facility from
other Banks subject to the submission of a NOC from the rescheduling bank or financial institution.
 Corporate Laws und Practices

c) Prior approval of Bangladesh Bank shall have to be obtained if the loan is related to the director of
any bank.

d) lnformation on such rescheduled loan accounts shall be reported to the Credit lnformation Bureau
(ClB) of Bangladesh Bank.

e) While reporting to the ClB, the rescheduled loans/advances should be shown as RS-1for first time
rescheduling, RS-2 for second time rescheduling and RS-3 for third time rescheduling. lf
rescheduling facility is availed through interest waiver, reporting should be RSIW-1 for first time
rescheduling, RSIW-2 for second time rescheduling and RSIW-3 for third time rescheduling.

f) Number of rescheduling should be mentioned in the sanction letter as well as in the date column of
sanction/last renewal/rescheduling in the basic CL form as RS-1/RS-2/RS3 or RSIW-1/RSIW-2/RSIW-3.

8.2.7. Special conditions for loan rescheduling

a) lf a loan account of an export-oriented garments industry or knit garments factory becomes

adversely classified due to stock lot, the loan may be rescheduled without the required down
payment. However, the sales/export proceeds from the stock lot must be used to repay the loan. lf
any such loan account remains unadjusted even after repaying the loan with sales/export proceeds
of the stock lot, the loan may be rescheduled without the required down payment based on
recovery probability and banker-customer relationship. The above mentioned facilities will not be
applicable to forced loan, project loan or term loan in this sector. Only such forced loans, which are
backed up with stock lot may avail such facilities. After rescheduling, new loan facility or loan
expansion application will be considered only after paying at least 75% of the "Outstanding
Balance". New loan facility from other banks is subject to the obtaining of NOC from the
rescheduling bank. b) lf a loan account of fertilizer importers becomes adversely classified due to
delay in government subsidy receipts and payment of subsidy bill, the loan may be rescheduled
without the required down payment. However, the receivable government subsidy must be used to
repay the loan. lf any such loan account remained unadjusted even after repaying the loan with a

government subsidy, the loan may be rescheduled without the required down payment on the
basis of recovery probability and banker-customer relationship.

c) For rescheduling as above no prior approval of Bangladesh Bank will be required; unless there is a
requirement from Bangladesh Bank in the context of large loan or related to the director of the
bank.

8.2.8. Restriction on extending the term to maturity of a term loan:

The term to maturity of a term loan may be extended subject to the following conditions and
restrictions:

a) The loan must be performing (Unclassified: Standard or SMA)

b) The decision should be made at the level where the loan was originally sanctioned

c) The maturity date may be extended by a period of time not exceeding25% of the current
remaining time to maturity

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 Corporate Luws snd Practices

8.3 DOS Circular No.-01 dated Date:19/01/20t4: Cash Reserve Ratio (CRR) and Statutory Liquidity
Ratio (SLR)

All scheduled banks in Bangladesh have to maintain Cash Reserve Ratio (CRR) and Statutory
Liquidity Ratio (SLR) in Compliance with the instructions given in clause (1) of Article 36 of
Bangladesh Bank Order,1,972 (as amended 2003) and clause (1-) of section 33 of Bank Company
Act, 1991 (Amended 2013)' respectively. Pursuant to the recent amendment of section 33 of ' Bank
Company Act, 1991, and in order to facilitate the maintenance of CRR and SLR by the scheduled
banks, and to clarify some related topics the following instructions are being issued.

8.3.1. (a) Cash Reserve Ratio (CRR):

Every scheduled bank has to maintain a balance in cash with BB the amount of which shall not be
less than such portion of its total demand and time liabilities as prescribed by BB from time to time,
by notification in the official Gazette.

BB may also prescribe the procedure of maintenance of cash reserve pursuant to its monetary
policy objectives.

At present, the required CRR is 5.5%on bi-weekly average basis of the average total demand and
time liabilities (ATDTL) with a provision of minimum 5% on daily basis of the same ATDTL. Banks are
advised to follow the circular issued by Monetary Policy Department of BB in this regard.

(b) Components of Cash Reserve:

At present, banks are allowed to maintain cash reserve with local currency (Taka) only. The day end
balances of the Taka current accounts maintained with different offices of BB will be aggregated to
compute the maintained cash reserve of the day.

The balance so maintained shall be un-encumbered in all aspect. The encumbered (lien against
discounting facility, etc. and capital lien in case of foreign banks) portion of the balance will be
deducted while computing both the maintained amount and excess of cash reserve.

8.3.2. (a) Statutory Liquidity Ratio (SLR):

Every scheduled bank has to maintain assets in cash or gold or in the form of un-encumbered
approved securities the market value of which shall not be less than such portion of its total
demand and time liabilities as prescribed by BB from time to time.

BB may also prescribe the procedure of determination of assets and liabilities and percentages of
maintainable assets in different classes.

At present, the required SLR is 18.5% daily for conventional banks and IO5% daily for lslamic
Shariah based banks and lslamic Shariah based banking of conventional banks of their average total
demand and time liabilities. Banks are advised to follow the circular issued by Monetary policy
Department of BB from time to time in this regard.

2I7 | l:1 i:, 'g *

 Corporate Laws snd Practtces

(b) (i) Components eligible for calculation of Statutory Liquidity Reserve:

The eligible components for maintaining Statutory Liquidity Reserve are cash in tills (both local and
foreign currency), gold, daily excess reserve (excess of Cash Reserve) maintained with BB, balance
maintained with the agent bank of BB and un-encumbered approved securities as defined in
section 5 clause 'ka' of Bank Company Act, 1991 (Amended 2013), credit balance in Foreign
Currency Clearing Account maintained with BB.

Daily excess of Cash Reserve (if any) will be calculated using the following formula:

Daily excess of Cash Reserve = (Day-end balance of un-encumbered cash maintained in Taka
current accounts with BB - Required cash reserve on Bi-weekly average basis).

(ii) Guidelines for use of Foreign Currency from Foreign Currency Clearing Account for SLR
purpose:

Banks may use foreign currency from Foreign Currency Clearing Account maintained with BB for
SLR purpose as long as there is credit balance in the account. However, no interest will be paid
on the used portion of foreign currency. Forex Reserve and Treasury Management Department
(FRTMD) of BB will credit interest on the balance held in the account as usual. After getting the
certification from Department of Off-site supervision (DOS) regarding the actual amount of
foreign currency used for SLR purpose, FRTMD will adjust (if required)the interest amount.

Banks should take utmost care while reporting the use of foreign currency in DB-Sfc statement
as any misreporting regarding the amount of foreign currency used for SLR purpose will attract a
penalty two times of the amount of interest already credited for the misreported amount along
with reversal of the interest credited.

8.3.3. Computation of Demand and Time Liabilities:

For the purpose of maintenance of CRR and SLR, demand and time liabilities should include all on-
balance sheet liabilities excluding the items listed below:

a) Paid up capital and reserves;

b) Loans taken from BB;
c) Credit Balance in Profit and Loss account;
d) lnter-bank items;
e) Repo, Special Repo and any kind of Liquidity Support taken from BB,

A list of components, (which are not limited to) is attached with this circular (Annex-1). Banks are
advised to approach BB for any doubt in reckoning a particular liability as demand or time liability for
CRR and SLR computation,

8.3.4. Submission of Reports regarding maintenance of CRR and SLR:

Banks shall submit hard copies of the monthly statements of "Maintenance of CRR", DB-4(C), DB-4(l),
DB-5(C) and DB-5(l) along with the soft copies of others regarding monthly position of maintenance of
CRR and SLR in the newly prescribed formats (attached) to Department of Off-site Supervision (DOS)

218 | l) a r r
 Corporate Laws and Pructices

within the 10th of the following month. The Reporting Formats attached with DOS Circular Letter
No.05/2008 has been amended and the new formats will be effective from February 0L,20L4. The soft
copies of the formats are available for collection from DOS.

8.3.5. Penalties

(a) Penal lnterest (Bank Rate plus 5%) and Penalty will be charged according to the instructions of
Bangladesh Bank Order, 1972 and DOS Circular No. 03/2010 for CRR related issues.
(b) Penalty will be charged at the prevailing Special Repo Rate on the amount by which the SLR falls
short daily.
(c) Delay submission of statement regarding maintenance of CRR and all other statements regarding
maintenance of SLR will attract daily penalty as stated in clause (6) of Article 36 of Bangladesh Bank
Order, 1972 and clause (11) of section 109 of Bank Company Act, 1991 (Amended 2013)
respectively.

219 lPxg*
 Corporute Lsws and Practices

Self-test question:

t. Discuss the powers of the Bangladesh Bank to control advances by Banking Companies

2 Make a checklist identifying special points in presentation financial statements of banking company
in line with BRPD circular and in compliance to international Accounting Standards.

3 Discuss the various bars imposed by Section 23 of the Bank Companies Act, 1991 on common
director.

4 Discuss the powers of the Bangladesh Bank for giving directions to other Banking Companies AS

provided in Section 45 of the Bank Companies Act, 1991.

5 REA Bank Limited re-valued its properties on 31" December 2017 by a professional valuation
company. Land and buildings of the bank has been re-valued to Tk. 300 million from Tk. 10 million,
historical cost of the land & building. The bank accounted for the revaluation surplus in 'Other
Reserve Account'. The bank now wanted to issue bonus share against the other reserve. Board of
Directors of the company approved the financial statements and approved 25% bonus share to be
issued for 2011. State the legal provisions for declaring dividend of a banking company with
reference to the Company Act 1994 and Bank Companies Act l-991.

6 What additional information is to be incorporated in the auditor's report of a banking company

under section 39 of the Bank Companies Act, 1991, in addition to the requirements of the
Companies Act, 1994?

7 Mention the circumstances when a bank company shall be deemed unable to pay its debts under
section 65(a) of the Bank Companies Act, 1991

8 Describe the circumstances under which Bangladesh Bank may apply for winding up of a bank.
Narrate the circumstances under which the Bangladesh Bank can dissolve the Board of Directors of
a banking company.

9 Mr. Q is the Managing Director of ABC Bank Limited and his position will be vacated on 01.08.2017
due to expiration of his contract as well as attaining at 65 years old. The Board of Directors of the
Bank has long cherished desires to appoint Mr. R- the existing Deputy Managing Director of the
Bank- as the next Managing Director of the Bank. Mr. R has been working as Deputy Managing
Director for the last l- and a half years whereas as per Bangladesh Banks requirements (BRPD
Circular letter No: 17 dated: 27 October 2013 on the subject matter of Rules and Regulations
regarding appointment of Chief Executive Officer of a Bank), he needs to continue in the position of
immediate next to Managing Director, for a minimum period of 2 years i.e. Mr. R has to continue as
a Deputy Managing Director for minimum 2 years and accordingly he will complete his 2 yearsE
service as Deputy Managing Director on 31,.1.2.2017 and will be eligible to act as a Managing
Director w.e.f. 1.1.2018. To fill the gap, the Board of Directors in its 254th meeting held on

22011;**
 Corporate Laws and Practices

25.07.2017 unanimously decided to appoint Mr. T-who is the most senior Deputy Managing
Director under contract service in ABC Bank Ltd, shall act as the Managing Director of Current
Charge by adopting the following resolution:

"RESOLVED THAT, the Board of Directors have unanimously decided to appoint Mr. T, Deputy
Managing Director, as the Managing Director (Current Charge) of ABC Bank Ltd. w.e.f. 1.8.2017 till
31..'J.2.2017."

ln practice, searching of a Managing Director is a really difficult job. This requires time and proper
plan to find a suitable Managing Director for a Commercial Bank. lt is mentioned here that due to
mindsets of the Board of Directors about Mr. R, the Bank neither searched for anyone as the next
Managing Director nor made any search committee. Chairman of the bank in a television interview
said that "Currently there are a few potential Managing Directors in the market for commercial
banks but we are really happy and proud to announce that our bank is in the process to appoint a
young and highly performing Managing Director who had joined this bank as Probationary Officer
and currently working as Deputy Managing Director. Our Board of Directors unofficially agreed to
retain Mr. R and accordingly we are going to appoint him for the next 5 years as the Managing
Director and CEO of the bank i.e. w.e.f. 01.01.2018 to 31.1.2.2022."

Required:

Comment and analyze the followings skeptically: 10

i) Resolutions of the 254th meeting of the Board of Directors of ABC Bank Ltd.

ii) Whether Mr. T, the Managing Director-Current Charge will be eligible to sanction loan within
the approved financial discretionary power of a Managing Director or not?

iii) Media statements of the Chairman.

10. A bank company starts its business only after getting license from Bangladesh Bank and operates
under Bank Companies Act, 1991, though it was initially registered as a Company with the Joint
Stock Registrar of Companies and Firms under Companies Act 1994. A Bank Company has to follow
Companies Act, 1994 as well as Banking Companies Act, 1991. lf a bank company requires to alter
its memorandum, which of the acts is to be followed and why?
 Corporate Laws and Practices

Answer to Self-test:

Answer to self-test 1:

Section 29 of the Bank Companies Act provides the following powers to Bangladesh Bank for regulating
the advances of the bank companies:
L Whenever the Bangladesh Bank is satisfied that it is necessary in the interest of the public to do
so it may formulate the policy related to advances to be adopted by the bank companies in
general or by any bank company in particular and when the policy has been so determined, all
bank companies or their bank company conceded as the case may be- shall be bound to follow
the policy as so determined.
2. Without prejudice of the power in general conferred by sub-section. (l), the Bangladesh Bank
may direct the bank companies either in general or any specialized bank - or special class of
bank companies in the following matters:
a) the credit ceilings to be followed'
b) the minimum ratio of petty loans or other loans to the total advances to be
followed:
c) the motive for which advances may or may not be made;
d) the maximum limit of advances which may be given to any bank company or special
group of bank companies or a person or community of persons

e) secured advance and ceiling of interest on advance'

f) the rates of interest to be fixed on advances'

3. If any bank company is in default in complying with the direction referred in clause (a) and (b) of
sub-section (2), the bank company shall by order of the Bangladesh Bank be held to be liable to
deposit such amount as ma), be determined by it and the bank company shall subject to the
condition specified by that bank under compulsion to comply with the direction. However, the
Bangladesh Bank shall not direct the said Bank Company to deposit an amount not higher than
the amount of which the default has taken place'
4. The amount deposited with the Bangladesh Bank under sub-section (3) or any Part thereof may
be remitted by it to the bank company conditionally or unconditionally by order in black and
white.

Answer to self-test 2:

The following detailed qualitative and quantitative disclosures are required in accordance with
Bangladesh Bank rules and regulations on capital adequacy under Basel ll issued through BRPD Circular
24, 03 August,2010 {BRPD Circular No. 24: Risk Based Capital Adequacy (RBCA) for Banks [Aug 03,
2010]). The purposes of these requirements are to complement the Capital Adequacy requirements and
the Pillar ll- Supervisory review process. These disclosures are intendment for market participants to
 Corporate Lsws and Practices

assess Key information about the Banks' exposure to various risks and to provide a consistent and
understandable disclosure framework as per regulatory requirement The checklist identifying
special
points in presentation financial statements of banking company in line with BRpD
circular and in
compliance to international Accounting standards are as followings: -
1. To maintain capital Adequacy ratio (CAR) at a minimu m of L0% of Risk Weighted Assets;
2. To adopt the standardized approach for credit risk for implementing Basel ll, using national
direction for:
a) adopting the credit rating agencies as external credit assessment institution (ECAI)
for claims on sovereigns and banks;
b) adopting simple/comprehensive approach for Credit Risk Mitigation (CRM);
c) all unrated corporate exposures are risk weighted by assigning L25% of risk weight;
3. To adopt standardized approach for market risk and basic indicator approach for operational
risk;
4. Capital adequacy returns must be submitted to Bangladesh Bank on a quarterly basis;
5. Performance and Rating of Banks:
Performance of the banking sector under CAMELS framework, which involves analysis, and
evaluation of the six crucial dimensions of banking operations, has been discussed in
this
chapter. The six indicators used in the rating system are (i) Capital adequacy, (ii)
Asset quality,
(iii) Management soundness, (iv) Earnings, (v) Liquidity and (vi) Sensitivity
to market risk.
6. Basel ll lmplementation in Bangladesh:

To make the banks in Bangladesh more shock absorbent as well as to cope

with international
best practices for risk management and, a sound and robust banking industry,
Bangladesh Bank
(BB), being regulatory& supervisory authority, is moving to implement Basel ll from early of
2009' ln this regard BB is pursuing consultative approach to implement Basel ll
in Bangladesh.
Thus a National Steering Committee, a Coordination Committee and Basel
ll lmplementation
Cell are carrying out the required activities. ln the meantime, an Action-plan/
Roadmap has
been published via BRpD circular no.1,4/2007 on 30 December 2007.
Under standardized approach, Basel ll implementation requires the recognition
of External
Credit Assessment lnstitutions (ECAls). For this, a guideline on the same
has been prepared. Two
credit rating agencies are operating in Bangladesh. They are registered with Securities
and
Exchange Commission and required to be recognized by BB for Basel purpose.
ll Recognition
process of the rating agencies is under process. Preparation of
the guideline on revised risk
based capital regulation in line with Basel ll is in progress.
Corporate Governance in Banks and Financial lnstitutions:

corporate Governance is the system of internal controls and procedures

used to define and
protect the rights and responsibilities of various stakeholders. ln
recent year, with the increase
of failure of large corporations due to poor corporate governance the issue
comes to front and
many organizations pronounce the guidelines those are intended to protect
the rights of various
stakeholders and reduce the conflict of interests among them. Banks
and Financial lnstitutions
(Fls) are "special" as they do not only accept and deploy
large amount of uncollateralized public
funds in fiduciary capacity, but also leverage such funds through credit creation.
The depositors,

223lllr1:.*
 Corporate Laws and Pructices

particularly retail depositors, cannot effectively protect themselves as they do not have
adequate information, nor are they in a position to coordinate with each other. lt is believed
that there could be a contagion effect resulting from the instability of one bank, which would
affect a class of banks or even the entire financial system and the economy' As one bank
becomes unstable, there may be a heightened perception of risk among depositors for the
entire class of such banks, resulting in a run on the deposits and putting the entire financial
system in jeopardy. The crisis of an individual bank may cause to create problem for entire
financial system as well as the monetary management of the country. So, there should have
clear and defined duties and responsibilities for the Management and the Board that act as the
fiduciary for shareholders and the depositors. ln view of the above, Bangladesh Bank is
deploying continuous effort by inserting appropriate provisions in the Banking Companies Act,
1991 and Financial lnstitutions Act, 1993, supplemented by prudential regulations/guidelines in
line with international best practices, The existing legal framework and significant current
practices in particular cover the following aspects:

The Board of Directors:

Composition, Terms, Qualification etc.: The maximum number of the Directors of the Board of
banks and Financial lnstitutions (Fls) would be L3 and lL respectively. Tenure of a Director of a
bank would be 3 years extendable to another one term i.e. a Director can continue his/her office
for six years at a stretch. A recess of one term is required after completion of six years as a
Director. For Fls the tenure of a Director is 3 years and is renewable. Not more than 10 percent
of the shares of a bank will be held by the members of a family. Not more than two member of a
family will become Director of a bank in case of holding of more than 5 percent share of the
Bank by that family and one member in case of holding of up to 5 percent share. Maximum
voting right of any shareholder is restricted to 5 percent of totalvoting rights of all shareholders
of the bank. On the other hand, maximum limit of holding shares of an Fl by a single
person/family/institution is 20 percent for domestic shareholders and 25 percent for joint
venture. To be appointed a Director of a Bank or Fl one requires to pass the 'fit and proper test'
criteria: s/he has to hold qualifying amount of shares and not to be a minor or undercharged
insolvent or mentally unsound with no record of criminal conviction or adverse judicial
comment in any civil or criminal proceeding, no record of penalization by any authority for
regulatory breach and, no loan default. ln addition, the Director of a Bank requires having at
least ten years of business or professional experience. No employee/executive, except CEO,
would be appointed as the Director of any Bank/Fl.

Appointment of Directors from Depositors:

For ensuring good governance in Banks, Banks are required to appoint 2 Directors from the
depositors who will be in addition to 13 (thirteen) directors mentioned in the sub-clause 15(6) of
Banking Companies Act, 1991. "Fit and proper test" criteria stated above, are applicable for
appointing Directors from depositors. ln addition, such Director should be a depositor of the
bank company must at least have a bachelor degree from any recognized university, shall not be

2241Y a ,E *,
 Corporate Laws and Practices

a director, officer/staff or advisor of any bank company, financial institution, insurance

company
or stock exchange, he, including his family members shall not hold more than l% shares
of the
paid up capital of the bank, shall not be a salaried staff of the bank, shall not
be involved with
any political party, shall not be a loan/tax/bill defaulter.
Removal of Directors and Vacation of office: A Bank/Fl by extra ordinary resolution can remove
any Director. Failure to attend in the three consecutive Board meetings without approval of
leave of absence, become default of loan of any bank or Fl and failure to repay the entire
defaulted loan within two months of receiving the notice, submission of false declaration at the
time of appointment and loss of qualification will cause to vacate the office of a Director.

Responsibilities and Authorities of the Board oj Directors

[a) Work-planning and Strategic Management: The Board shall determine the objectives
and goals and to this end shall chalk out strategies and work-plans on annual basis. The
Board shall have its analytical review incorporated in the Annual Report as regard the
success/failure in achieving the business and other targets as set out in its annual work-
plan and shall apprise the shareholders of its opinions/recommendations on future
plans and strategies. lt shall set the Key Performance lndicators (Kpls)
for the CEO and
other senior executives and have it evaluated at times.

ib) [ending and Risk Management: The policies, strategies, procedures etc. in respect of
appraisal of loan/investment proposal, sanctioning, disbursement, recovery,
rescheduling and writing-off thereof shall be made with the Board's approval under
the
purview of the existing laws, rules and regulations. The Board shallspecifically
distribute
the power of sanction of loan/investment and such distribution should desirably be
made among the CEO and his subordinate executives as much as possible. No Director,
however, shall interfere, directly or indirectly, into the process of loan approval. The
Board shall frame policies for risk management and get them complied with and
shall
monitor the compliance thereof quarterly.

[c] Interna! Control Management: The Board shall be vigilant on the internal control
system of the bank and Financial lnstitutions in orderto attain and maintain satisfactory
qualitative standard of its loan/investment portfolio. 1t shall review
the reports
submitted by its audit committee regarding compliance of recommendations made
in
internal and external audit reports and the Bangladesh Bank inspection reports.

(d) Human Resources Management and Development: Policies relating to recruitment,

promotion, transfer, disciplinary and punitive measures, human resources
development
etc. and service rules shall be framed and approved by the Board. The
Chairman or the
Directors shall in no way involve themselves or interfere into or influence
over any
administrative affairs including recruitment, promotion, transfer and disciplinary
measures as executed under the set service rules. No member of the Board
of Directors
shall be included in the selection committees for recruitment and promotion to
 Corporate Laws ancl Practices

different levels. Recruitment and promotion to the immediate two tiers below the CEO
shall, however, rest upon the Board. Such recruitment and promotion shall have to be
carried out complying with the service rules i.e., policies for recruitment and promotion.

[e) Financial Management: The annual budget and the statutory financial statements shall
finally be prepared with the approval of the Board. lt shall quarterly review/monitor the
positions in respect of bank's income, expenditure, liquidity, non-performing asset,
capital base and adequacy, maintenance of loan loss provision and steps taken for
recovery of defaulted loans including legal measures. The Board shall frame the policies
and procedures for bank's purchase and procurement activities and shall accordingly
approve the distribution of power for making such expenditures. The maximum possible
delegation of such power shall rest on the CEO and his subordinates. Decisions on
matters relating to infrastructure development and purchase of land, building, vehicles
etc. for the purpose of bank's business shall, however, be adopted with the approval of
the Board.

(0 Formation of Supporting Committees: For decision on urgent matters an Executive

Committee, whatever name called, may be formed with the Directors. There shall be no
committee or sub-committee of the Board other than the Executive Committee and the
audit committee. No Alternate Director shall be included in these committees.

tS) Appointment of CEO: The Board shall appoint a competent CEO, whatever name called,
for the Bank/Fl with the approval of the Bangladesh Bank. The CEO for banking
companies should be appointed for tenure of at least 3 years.

Responsibitities of the Chairman of the Board of Directors: As the Chairman of the Board of
Directors (or Chairman of any Committee formed by the Board or any Director) does not
personally possess the jurisdiction to apply policymaking or executive authority, he shall not
participate in or interfere into the administrative or operational and routine affairs of the bank.
The Chairman may conduct on-site inspection of any bank-branch or financing activities under
the purview of the oversight responsibilities of the Board. He may call for any information
relating to bank's operation or ask for investigation into any such affairs; he may submit such
information or investigation report to the meeting of the Board or the Executive Committee and
if deemed necessary, with the approval of the Board, s/he shall effect necessary action thereon
in accordance with the set rules through the CEO. However, any complaint against the CEO shall
have to be apprised to Bangladesh Bank through the Board along with the statement of the CEO.

Role of the Audit Committee: The Audit Committee of Board of Directors will assist the Board in
fulfilling its oversight responsibilities including implementation of the objectives, strategies and
overall business plans set by the Board for effective functioning of the bank. The Committee will
review the financial reporting process, the system of internal control and management of
financial risks, the audit process, and the bank's process for monitoring compliance with laws
and regulations and its own code of business conduct.

2261P * g*.
 Corporate Laws and Pructices

The Chief Executive Officer (CEO)

Appointment: To be appointed as chief executive of a banking company, an individual must

possess at least 15 years of banking experience with at least 2 years in the level next below
the
chief executive and must meet the other stipulations mentioned above for Directors, except
qualifying shares. The minimum experience of the CEO in the case of Fl is 12 years and
experience of 2 years in the post of next below the CEO is not required. Maximum age limit of
CEO of Banks is 65 years.

Responsibilities: The CEO of the bank shall discharge the responsibilities and hold the
authorities as follows:

(a) ln terms of the financial, business and administrative authorities vested upon him by the
Board, the CEo shall discharge his own responsibilities. S/he shall remain accountable for
achievement of financial and other business targets by means of business plan, efficient
implementation thereof and prudent administrative and financial management.

(b) (b) The CEo shall ensure compliance of the Banking Companies Act, 199L or Financial
lnstitutions Act, 1993 as the case may be and/or other relevant laws and regulations in
discharge of routine functions of the bank.

(c) The recruitment and promotion of all staff of the bank/Fl except those in the two tiers
below him shall rest on the CEO. S/he shall act in such cases in accordance with the
approved service rules on the basis of the human resources policy and sanctioned
strength of employees as approved by the Board. The authority relating to transfer of and
disciplinary measures against the staff, shall rest on him, which S/he shall apply in
accordance with the approved service rules. Besides, under the purview of the human
resources policy as approved by the Board, he shall nominate officers for training etc.

Disclosure Requirements:

Banks/Fls are required to prepare their financial statements comprising of balance

sheet, profit
and loss account, cash flow statement, statement of changes in equity, liquidity statement
and
other explanatory notes in accordance with lnternational Accounting Standard (lAS). Copies
of
financial statements should be preserved in each of the bank branches, so that the customers
of
the bank may readily use those on request. Besides, balance sheet should be affixed in
a visible
place of each bank branch, The financial statements should be published
in widely circulated
one Bangla and one English daily newspaper within one week of submission of the
statements
to Bangladesh Bank so that the stakeholders of the bank including its depositors, shareholders
and regulatory bodies can get information about the bank easily. These should also
be disclosed
in the bank's website.

111 I 11 t1 t:t,"
LLt lt
 Corporate Luws and Practices

Other lssues:

Lending to the Director of own bank/Fl is restricted up to 50 percent of the paid-up capital of
such Director. Banks are not allowed to appoint Consultants for routine works that can be
performed by the regular staff. The Consultants should have specific terms of references (ToR).
No past Chairman, Director, Adviser, Chief Executive would be appointed as the Consultant of
the same bank. No Consultant or Advisor shall participate in decision making process or exercise
power regarding the financial, administrative or operational and routine affairs of the bank.
With the view to save the interest of the Depositors, Banks are to appoint two Directors from
the depositors who will be in addition to 13 Directors from the shareholders. lssuance of
comprehensive guideline on maintenance of risk based capital in accordance with the Basel ll is
under process which would strengthen long term sustainability of banks.

Answer to self-test 3:

Bar on common directors [Section 23]: As contained in section 23 of the Bank Companies Act, 199L,
unless anything is contained in any memorandum ad articles of association of a company with the
permission of the Bangladesh Bank, no banking company, other than a new bank or specialized bank,
incorporated in Bangladesh Bank shall have as a director any person who is:

a. A director of any other banking company or financial institution not engaged in banking business:

o a director of insurance company

. an external director, a legal adviser or adviser or otherwise engaged in any responsibility of

profit of the banking company
. an adviser of any other banking company.

b A director of companies which are entitled to exercise voting rights in excess of twenty percent of
the total voting rights of all the shareholders of the banking company. The above provision shall
however, not apply in the case of a director appointed by the government.
c lf a person, who is not entitled to be a director as per law, becomes director in any way, the
Bangladesh Bank may remove such person from the post of director. Such director shall however,
be given an opportunity to show cause before removal. All action against the said director shall be
completed by the Bangladesh Bank with in a period not exceeding three months from the date
when the fact first came to the knowledge of the bank'
d. lf immediately before the commencement of this act anyone holding office as director of banking
company which among others are entitled to exercise voting rights in excess of twenty percent of
total voting rights of all the shareholders of banking company shall:
o either, resign his office as director of the banking company, or
. choose such number of companies among themselves are not entitled of exercising voting
rights in excess of twenty percent of the total voting rights of all the shareholders.

228 1{};tgr:
 Corporate Luws and Practices

Answer to self-test 4:

Powers of Bangladesh Bank to give Directions [Section 45]

1,. Where the Bangladesh Bank is satisfied that-

a. in the public interest; or

b. in furtherance of monetary and banking policy; or

c. to prevent the affairs of any banking company being conducted detrimental to the interest
to the depositors or prejudicial to the interest of the banking company; or
d. To ensure the proper management of any banking company generally -

it is necessary to issue directions to banking companies or to any special banking company in particular,
it may time to time issue such directions as it seem fit and the banking companies or the banking
company as the case may be shall be bound to comply with such directions.

2' The Bangladesh bank may on representation cause to it or of its own motion may
cancel or modify
any decision taken under this section.

Answer to self-test 5:

Articles 96- 103 of 1994 deals dividend and reserve. According to section
9g of the schedule I

Regulations of the companies Act no dividend shall be paid otherwise

than out of profits of the year or
any other undistributed profits. ln the above case REA Bank re-valued its
building and land by a
professional valuation company and accounted for revaluation
surplus in other Reserve Account.
According to the companies Act L994 and the Bank companies Act 1gg1
the Board of Directors of REA
Bank Ltd cannot issue bonus share from the revaluation surplus. on
the other hand, the re-valuation
done at the end of December 2017 and the decision to issue 25% bonus
share to be issued before the
revaluation which is arbitrary in all cases.

Answer to self-test 6:

lncorporation of additional information in auditor's report:

ln addition to the matters which under the aforesaid Act the auditor is
required to state in his report, he
shall also state the following information:

1) whether or not the financial statement shows a true picture of profit

and loss for the period
covered by such audit;
2) whether or not the financial statement has been prepared accurately
in accordance with general
accounting procedures;
3) whether or not the financial statement has been prepared in accordance
with the provisions of
relevant existing laws or rules and the instructions issued by the
Bangladesh Bank in respect of
accounts;

229lt:'a g t:
 Corporate Laws and Practices

advances or other
4) whether or not adequate provision have been made for realization of doubtful
fixed by the
doubtful accounts; whether or not the limit of repayment of advance or loan
Bangladesh Bank from time to time is satisfactory or not;
prescribed by
s) whether or not financial statement has been prepared according to the standard
Bangladesh Bank in consultation with the professional accountants of
Bangladesh;
all records and
6) whether or not the banking company has properly maintained and-consolidated
accounts received from its branches;
has been found to be
7) whether or not the information and explanations asked by the auditor
satisfactory;
notice of the shareholders
8) any other matter which the auditor considers should be brought to the
of the banking comPanY.

Answer to self-test 7:

Banking: company shalt be deemed to be unable pay debts:

prejudice to the provisions of section
According-to section 65(a) of the-Bank companies ct, 1991, without
242 ofthe Companies Act, L994, abanking company shall be deemed to be unable to pay'its debts if:

1) it has refused to meet any lawful demand made at any of its offices or branches
with in, two
working daYs; or
Bank certifies that the
Z\ such demand is made at a place where there is an office and if Bangladesh
banking company is unable to pay its debts; or

3) Bangladesh Bank certifies in writing that the banking company is unable

to pay its debts'

Answer to self-test 8:
(Section 65) Bangladesh Bank
Application of Bangladesh Bank for winding u to Banking Company
may apply for the winding up of a bank company under the following
circumstances:

(a) As the banking comPanY-

(i) has failed to comply with the requirements of maintaining minimum capital reserve

fund under section 13 of Banking Companies Act, 1991; or

(ii) has failed to comply the condition of issuance of license of section

31of Banking
companies Act, 1991 become disentitled to carry on banking business
in Bangladesh'
under section 31 of Banking Companies Act, 1991 or
deposits; or
(iii) has been prohibited by the Bangladesh Bank from receiving fresh
than
(iv) has failed to comply with any requirement of Banking Companies Act, 1991 other
after notice in
the requirement laid down in section 13, and has continued such failure'
writing of such failure has been conveyed to it; or

230l11eg*
 Corporate Luws and Pructices

(v) has continued any contravention of any provision of Banking Companies Act, 1991 after
Bangladesh Bank conveys the bank company issuing a written notice of such
contravention; or

(b) if the Bangladesh Bank is in such opinion-

(i) compromise or arrangement approved by a court relating to bank company cannot be

implemented satisfactorily with or without modifications; or

(ii) returns, statements or information that are furnished to Bangladesh Bank disclose that
the bank company is unable to pay its debts; or
(iii) the continuance of the bank company is prejudicial to the interest of its depositors.
Power of Bangladesh Bank to dissolve the Board of Directors (section 47): The
Bangladesh Bank may dissolve / supersede the Board of Directors of a banking company
under the following circumstances:

Where the Bangladesh Bank is satisfied that-

(a) The activities of the board of directors, by whatever name called, of a banking company
is or is likely to be detrimental to the interest of the banking company or its depositors
or otherwise undesirable;

(b) lf the benefit of public or preventing the affairs of a bank company detrimental to the
benefit of its depositors or ensuing the proper management of the bank company it has
become necessary to dissolve the Board of Directors.

Answer to self-test 9:

i) According to the sub-section 1 of section 15A of Banking Companies 1991, the office of the chief
executive officer of any banking company shall not remain vacant for more than three months
successively. According to the sub-section 2, if the office of the chief executive officer of a banking
company has not been filled within 3 months, the Bangladesh Bank may appoint an administrator
for discharging the functions of the chief executive officer of the said company and the said
company shall bear the expenditures caused through his wages and other conveniences.

Here, the Board of Directors of ABC Ltd. has done a contravention of the section 15A of Banking
Companies Act 1991.They have to cancel the Board resolution by taking another resolution where
Mr. T shall be acting as Managing Director Current Charge till 30.10.2017 and by this time a suitable
Managing Directorto be mandatorily appointed w.e.f. 1.11".2017. Otherwise Bangladesh Bank shall
appoint an administrator.

ii) According to the sub-section 1 of section 15A of Banking Companies 199L, notwithstanding
anything contained in this Act or any other law in force, the person temporarily discharging the
functions of the vacant office of the chief executive officer, whatever be the name of the office, of

231 ] P a g *
 Corporate Laws and Pructtces

any banking company shall be responsible for the discharge of the general functions of the chief
executive officer of the banking company concerned. So, the Managing Director (Current Charge)
can continue the operation as usual and is eligible to sanction loans and advances within the
financial discretionary power of a Managing Director.

iii) According to the para 5 of BRPD Circular Letter No: L7 dated: 27 October 2013 on the subject
matter of Rules and Regulations regarding appointment of Chief Executive Officer of a Bank, a
Managing Director shall be appointed for a term maximum 3 years only subject to re-appointment
for an another term of 3 years. So Mr. R cannot be appointed for 5 years in one term. Moreover,
the bank is in a situation that it has to mandatorily appoint a Managing Director on or before
t.tt.20t7 being Mr. T hardly can continue as a Managing Director till 30.10.2017 and Mr. R is
disqualified falling in a time gap restriction for a period of 2 months on that day. This is complex
situation for the bank. However, Board may go to hard side and allow the Bangladesh Bank to take
action by appointing administrator for the bank and later on may appeal to Bangladesh Bank for
shaping things up. But, obviously, this is too risky for the bank.

Answer to self-test 10:

Both the Acts will be applicable. Section L2 of Companies Act 1991- and section tt7 of Banking
Companies Act will be applied in case of alteration of Memorandum of a bank company. Before altering
the articles of association, written permission from Bangladesh Bank is mandatory. According to section
1.17 of Banking Companies Act 1991, notwithstanding anything contained in the Companies Act, no
application for the alteration of the Memorandum of a bank shall be maintainable unless Bangladesh
Bank certifies that there is no objection to such alteration.
 Corporate Laws and Practices

Answer to lnteractive Question

Answer to lnteractive Question 1:

As per section 13 of the Bank Companies Act 1991 together with BRPD circular, the minimum capital
requirement of a Bank is BDT 4,000 million or lOYo Risk Weighted Asset, whichever is higher. Here we
found the following statement regarding capital of CD Bank Ltd;
Figure in BDT million
Capital Maintained 7,130
Total requirement of Capital based on 10% Risk Weighted Assets 6,920

Therefore, Capital Excess 210

I have found that the bank would be able to release up-to BDT 210 million only from its total capital
beyond which it cannot go. Cash dividend will reduce the capital whereas bonus dividend will have no
impact in the total capital structure. So, lwould suggest the board to allow 5%i.e. BD 200 million cash
dividend and t5% stock dividend. After execution, the capital of the bank will be revised as:
Figure in BDT million
Paid up-capital 4600
Statutory Reserve L830
Retained Earnings 25
1% Provision of Loans & Advances 475

Revised total capital 6930

Required Capital (10% RWA) (6e20)

Excess Capital 10
As per section 13 of Bank Companies Act 1-991 together with BRPD circular, the minimum capital
requirement of a Bank is BDT 4000 million or 10% Risk Weighted Asset, whichever is higher. Here I have
found the following statement regarding capital of CD Bank Ltd;
Fig in BDT million
Total requirement of Capital based on 10% 7,350
Risk Weighted Assets Capital Maintained 7,L30

Therefore, Capital Shortfall 22O

As per section 22 of Bank Companies Act 1991, no bank companies except specialized banks are entitled
to pay dividend on their shares if the company failed to reserve the capital as per section l-3 as

mentioned above. So, CD Bank Ltd. has a capital shortfall of BDT 220 million. So it cannot declare any
dividend.

As per sub-section (7) of sec-13, if Bangladesh Bank is of such a decision, that any bank has failed to
reserve capital as per the required sum, rate or procedure stipulated in sub-section (1), then it may
direct orders to the concerned bank company intimating to minimize the gap within maximum one year

233]r13 *';;
 Corporate Laws und Practices

and in the event of continuation of such offence after the expiration of such a prescribed deadline, it
may take any or all of the punishable measures of the following against the bank companies.

a) Proscription to collect deposits within the particular term or before the realization of such deficiU

b) Proscription to collect new credit and advance within the particular term or until the
minimization of the parallel deficit.

c) For the failure aforesaid, imposition of fine from minimum twenty lac taka to maximum one
crore taka and in the event such an infringement is continued, imposition of maximum fifty
thousand taka for every day after the first day of infringement aforesaid; and

d) lmplication of other punishment or preventive measures under bank Companies Act 1991.
e) to invest in the capital market
As per section 26 KA of Bank Companies Act 1991, a bank is eligible
equivalent to 25% of its total shareholders'equity. Total shareholders'equity shall include paid
up capital, statutory reserve, share premium & retained earnings.

Therefore, total shareholders' equity of CD bank limited is

Fig in BDT million
Paid up-capital 4,000
Statutory Reserve 1,830
Share Premium 0
Retained Earnings 825

Total capital 6,655

So, maximum investment limit = BDT 6,655 x 25%o = BDT 1,663.75 million.
Current investment = BDT 900 million
Therefore, maximum additional investment amount = BDT (1663.75-900) million

= 763.75 million.
As per sub-section (Kha) of sec (26), a bank has the maximum limit to invest/hold in any shares &
securities of a company equivalent to its 10% of collected capital. Here, the paid up capital of CSD Ltd. is
BDT 500 million. So, CD Bank Ltd. can hardly investment in the shares & securities of CSD Ltd up-to BDT
500 million (BDT 5000 x10%) only.

Answer to lnteractive Question 2:

According to Section 17(1) of the Bank Company Act, 1991, the office of director Mr. X (director of CB
Bank Ltd.) will stand vacated since he has failed to pay the amount due from him on account of the
guarantee given by him to JB Bank Ltd.

As per Section 17(5) to (8) of the Bank Company Act, 199i- where the post of director falls vacant under
Section 17 as above, the amount due to the concerned banking company or the financial institution shall

234 1i:*ge
 Corporate Laws and Practices

be realized by adjusting the share value of the director of the post fallen vacant and the amount which
still remains due after such adjustment shall be deemed to be public demand and be recoverable under
the Public Demands (Ben. Act ttt of L913) Recovery Act.

Where the post of a director of a banking company or financial institution falls vacant under Section 17
as above, the person who was the director against the vacant post shall not be eligible to be director of
the said banking company or financial institution or any other banking company or financial institution
within a period of one year from the date of full payment of the dues to the concerned banking
company or financial institution.

thedirectorof anybankcompanyunderSection 17(S"loftheBCAl-ggLreceivesanynotice,hewill not

lf
be entitled to transfer all the shares holding on his possession by the name in the bank he/she used-to
serve save as otherwise entire dues of the concerned banks and financial institutions are paid.

No questions can be raised in any other courts other than courts having jurisdiction under Section 3 of
the Companies Act, (Act 18 of 1994) regarding any proceedings, order or decision under Section 17 of
the BCA 199L.

Answer to lnteractive Question 3

PAYMENT OF DIVIDEND BY BANK COMPANIES

(BRPD Circular Letter No. 18 dated Octob er 20,2OO2.l

ln terms of the provisions incorporated in Bank Companies Act, L991, banks can declare
their dividend
without prior approval of Bangladesh Bank subject to compliance of the following conditions: -

(1) No dividend in cash or in bonus share (keeping in consideration the order issued on 11.09.2001
by
the Securities and Exchange Commission in respect of issuance of bonus share) can be declared with
short-fall in capitalof the bank.

(2) Banks shall have to comply with the following conditions in respect
of maintenance of provision:

(a) Provision against adversely classified loans shall have to be maintained at the rate(s)
specified by Bangladesh Bank;

(b) General provision @ 1% against unclassified loans shall have to

be maintained;

(c) Provision against 'lnvestment' and 'Other Assets' shall have to be maintained at the rate(s)
specified by Bangladesh Bank.

(3) Prior to declaration of dividend, the concerned bank shall have to

obtain specifically a certificate
from the external auditor to this effect that provisions have been properly maintained having

235 1i];rg*
 Corporate Laws snd Practices

followed/complied with the rules, regulations and norms issued by Bangladesh Bank and there is no
short-fall in respect of maintenance of capital adequacy and provision.

(4) ln case of declaring dividend in cash at higher rate i.e., beyond 2O%o , a sum equal to the amount of
dividend in excess of 20% shall have to be kept deposited in the Dividend Equalization Account which
shall be treated as 'Core Capital' of the bank.

(5) lf any post-facto review during on-sight inspection by Bangladesh Bank reveals any deviation in
compliance of the above conditions in declaring dividend of any year, prior permission from Bangladesh
Bank shall have to be obtained before declaration of dividend for the next year.

Answer to lnteractive Question 4:

Section 23(1Xa) of The Bank Companies Act, 1991 states that:

Notwithstanding anything contained in any other law for the time being in force or in the memorandum or
articles of association of any company no person being a director of a bank company can at the same time
remain as director of any other bank company or financial institution. However, he may remain director of
any insurance company for two terms. Therefore, Mr. X needs to resign from MNO Company Limited, a
non-banking financial institution and one insurance company.

Answer to lnteractive Question 5:

As per provisions of Banking Companies no banking company or financial institution shall grant any kind
of loan facility in favor of any defaulting borrower. The definition 'defaulting borrower' includes those
whose principal or interest of the loan has become overdue for a period exceeding 06 months. ln light of
the same, since Asian Holdings Limited is a defaulter and its overdue is more than 06 months with one
of the banks, BD Bank Limited cannot grant loan to Asian Holdings Limited.

Answer to lnteractive question 5

Power of Bangladesh Bank to dissolve the Board of Directors (section 47):

As per section 47 of Bank Companies Act, 1991, the Bangladesh Bank may dissolve/supersede the Board
of Directors of a banking company under the following circumstances:

1) Where the Bangladesh Bank is satisfied that-

a) the activities of the board of directors, by whatever name called, of a banking company is or
is likely to be detrimental to the interest of the banking company or its depositors or
otherwise undesirable;
b) for all or any of the reasons mentioned in sub-section 1 of section 46, it is necessary to do $
may be specified in the order the Bangladesh bank may, for reasons to be recorded in

236 1i];ig*
 Corporate Laws and Practices

writing by order, supersede the Board of Directors of a banking company with effect from
such date and Jar such period as may be specified in the order.

The period of suspension specified in an order under sub- section (1) may from time to time be extended
by the Bangladesh Bank, however, that the total period of suppression does not exceed two years;

All powers and duties of the Board of Directors shall during this period of suppression, be exercised and
performed such persons as the Bangladesh Bank may from time to time appoint on this behalf.

The provisions of sub-section (2), (3), (4) and (5) section 46 shall, with the necessary modifications, apply
to an order made under this section.

Answer to lnteractive Question 7:

Both the Acts will be applicable. Section L2 of Companies Act 1991 and section tt7 of Banking
Companies Act will be applied in case of alteration of Memorandum of a bank company. Before altering
the articles of association, written permission from Bangladesh Bank is mandatory. According to section
L17 of Banking Companies Act 1991, notwithstanding anything contained in the Companies Act, no
application for the alteration of the Memorandum of a bank shall be maintainable unless Bangladesh
Bank certifies that there is no objection to such alteration.

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Chapter 4
The Financial !nstitutions Act, 1993

Contents

lntroduction

Examinotion context

Topic List

1. Preliminory ond definitions

2. Lice n si n g of fi no ncial i nstitutions

3. Reserve fund, dividends, bolance-sheet

4. Business rules

5. Mointenance of minimum liquid ossets

6. lnspection

7. Submission of statement of accounts ond audit of accounts

8. Morotorium in respect of finoncial institutions, reconstruction etc.

9. Offences ond punishments

10. Miscellaneous

Answers to lnteractive questions

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 Corporate Luws and Practices

Exam requirements

Finonciol tnstitution Act 199i is on integrol part of the syllobus. Typicolly, ten to fifteen percent of the
questions come from the part of Finoncial lnstitution Act 1993. tJnderstonding the basic precepts reloting
to this oct is vitol.

You are likely to be presented with scenarios and moy hove to conclude whether the formotion of o
finoncing business is valid, the procedures of dividend, osset monogement hove been followed
effectively, how the deposits ore receipt ond credit focilities ore provided. They will not be examined
directly but illustrote points of low thot could be.

ln the assessment, candidotes moy be tested in following oreos:

a. Licensing of financial institutions

b. Reserve fund, dividends, balance-sheet

c. Business rules

d. Maintenance of minimum liquid assets

e. lnspection

f. Submission of statement of accounts and audit of accounts

g. Moratorium in respect of financial institutions, reconstruction etc.

h. Offences and punishments

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 Corporate Laws and Practices

2. Definitions:

Unless there is anything repugnant in the subject or context, in this Act-

a) "financing business" means the business carried on by any financial institution;

b) "financial institution" means such non-banking financial institutions, which-

i. make loans and advances for industries, commerce, agriculture or building construction; or

ii. carry out the business of underwriting, receiving, investing and reinvesting shares, stocks,
bonds, debentures issued by the Government or any statutory organization or stocks or
securities or other marketable securities; or

iii. carry out instalment transactions including the lease of machinery and equipmenU or

iv. finance venture capital; and shall include merchant banks, investment companies, mutual
associations, mutual companies, leasing companies or building societies;

c) "credit" means any financial loan on the basis of interest or any loan repayable at a premium, but
shall not include loans granted under the condition to issue a debenture or other security to a
company or other statutory organization;

d) "creditor" means any person entitled to have returned money deposited by him or any other
person;

e) "credit facilities" means-

i) the promise of a financial institution to grant advances and other facilities or to bear liabilities
on behalf of a borrower;
ii) the bearing, on behalf of a borrower, of his other liabilities by a financial institution;

f) "company" means any company registered under the Companies Act, 1913 (Vll of 1913);

g) "Companies Act" means the Companies Act, 1913 (Vll of 1913);

h) "auditor" means any person who, subject to the provisions of this Act, has been appointed to audit
the accounts and transactions of financial institutions;

i) "director" shall also include such persons as perform by order or direction any duty of a director of a
financial institution and shall also include alternate and deputy directors;

j) "regulation" means any regulation made under this Act;

k) "Bangladesh Bank" means the Bangladesh Bank established under the Bangladesh Bank Order,1972
(PO No.126 of 1972);

l) "investment company" means a company primarily or wholly engaged in the buying and selling of
securities of other companies, and shall include companies which have at any time invested eighty
per cent of its paid-up capital in other companies, but shall not include any banking or insurance
company or organization which is a member of the stock exchange;

240 lilr:ge
 Corporate Laws and Practices

m) "building society" means a society which collects savings and grants loans for the construction of
buildings and the buying of properties;

n) "person" means any company, institution or organization;

o) "banking company" means any banking company established under the Banking Companies Act,
1991(Act No.14 of 1991);

p) "merchant bank" means a bank which assumes the responsibility for the securities of other
organizations or companies and gives advice on the amalgamation, or other commercial enterprises,
of such customers;

q) "mutual association" means a savings association which does not issue capital, stocks and the
depositors and borrowers of which are its owners and controllers;

r) "mutualcompany" means an organization which is devoid of capitaland the net profit of which is
distributed among the owners and borrowers in proportion to the business activities;

s) "leasing company" means a company which leases machines and implements as its business or part
of its business or finances such leasing.

A. Licensing of financial institutions

4. Licensing of financial institutions:

(1) ttto person shall carry on any financial business without a license to run a financial institution
issued by the Bangladesh Bank.

(2) Every financial institution in existence on the commencement of this Act shall, before the expiry
of six months from such commencement, apply in writing to the Bangladesh Bank for a license
under this section:

Provided that nothing in sub-section (1) shall be deemed to prohibit a financial institution in existence on
the commencement of this Act from carrying on business, if-

a) its application under this section is under consideration, or

b) it has not, by a notice, been informed by the Bangladesh Bank that a license cannot be
granted to it.

(3) eefore granting a license under this section, the Bangladesh Bank may require to be satisfied with
regard to a proposed financial institution in respect of the following matters, namely:
a) the financial situation;
b) the characteristics of the management;
c) the sufficiency of the capital structure and the earning capacity;

d) the purposes mentioned in the memorandum;

e) the public interest;

24llFage
 Corporate Laws and Practices

(4) The Bangladesh Bank may impose on any license to run a financial institution such conditions as
it thinks fit;

(5) The Bangladesh Bank may at any time, after giving opportunity for a hearing, alter any condition
of a license to run a financial institutlon and may add new conditions.

5. lnvestigations on suspect persons employed in the financing business

The Bangladesh Bank may, if it appears to it or if it has reason to believe that any person carries on the
business of financing in contravention of the provisions of section 4,

a) order any information, document, file, book, account and record in possession, in the
custody or under the control of the said person to be submitted to iU

b) confer on any person the power to enter and search any premises of such person and to
seize the documents, files, books and accounts and records concerned.

5. Minimum Capital:

(1) The Bangladesh Bank shall prescribe the minimum capital of every financial institution

(2) No financial institution shall be granted a license under this Act, if the amount of its issued
capital and paid-up capital is less than the minimum capital prescribed under sub-section (1) and
existing licenses, if any, shall be cancelled.

7. Restrictions on the opening of branches:

(1) Nofinancial institutionmay,withoutthepriorconsentinwritingoftheBangladeshBank,openat

any place in or outside of Bangladesh a branch or office, nor change the location of an existing
branch or office.

(2) The Bangladesh Bank shall approve of or reject an application of a financial institution for the
opening of a branch or office under sub-section (L) on consideration of the matters mentioned in
section 4 (3) and the decision of the Bangladesh Bank in this matter shall be final.

8. Cancellation of a license:

(1) The Bangladesh Bank may cancel the license of a financial institution granted under this Act on
account of the following reasons, namely:

a) if it does not carry on the business for which it had been established;
b) if the financial institution goes into liquidation or if its business is closed;
c) if it furnishes false or misleading information or documents in order to receive a license;
d) if it carries on its business in a manner detrimental to the interests of the depositors;
e) if its assets are not sufficient to pay the claims of its depositors;
f) if it carries on business maintaining an amount of paid-up capital which is less than the
amount of the minimum capital;

2421? x x*
 Corporate Lah,s and Practices

g) if the conditions of the license are contravened;

h) if the financial institution or any of its directors is convicted for an offence underthis Act.

(2) Notwithstanding anything contained in sub-section (1), no license of a financial institution shall
be cancelled without granting, through no more than fifteen days' notice in writing before the
cancellation of the license of the financial institution, an opportunity to show the reasons for
which its license should not be cancelled.

(3) Where the license of a financial institution has been cancelled, the financial institution concerned
shallbe immediately informed and a notice of the cancellation shall be published in the Gazette.

(4) Beginning from the date on which a notice under sub-section (3) has been published, the
financial institution concerned shall cease to carry out any financialtransaction except, subject to
the consent of the Bangladesh Bank, such measures as may be required to conveniently suspend
its business.

(5) The provision of sub-section (4) shall not be prejudicial to the rights or claims of any person on
anyfinancial institution orthe rights or claims of anyfinancialinstitution or any person.

B. Reserve fund, dividends, balance-sheet

9. Reserve Fund:

Every financial institution shall maintain a reserve fund in such manner as may be prescribed by
regulations.

10. Restriction on the payment of dividends:

No financial institution shall pay any dividend on its shares, unless all its capitalized expenses including
preliminary expenses, organization expenses, commission for share selling and brokerage, losses and
other items have been completely written off.

11. Display of balance-sheet:

Every financial institution shall display a copy of its last audited balance-sheet together with the names of
its directors all year through in a conspicuous place in each of its offices and branches and shall, within six
months before the end of the year concerned, publish the said balance-sheet in at least one daily
newspaper.

12. Supply of information:

The Bangladesh Bank may direct any financial institution to supply any information and every financial
institution shall be bound to supply the information so directed within such period and in such manner as
the Bangladesh Bank may determine.

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 Corporate Laws und Practices

C. Business rules

13. Acknowledgement of receipt of deposits:

Where a financial institution receives from any person a deposit, it shall, as a proof of having received the
money, immediately make out a receipt to such person.

14. Restrictions regarding credit facilities, etc.:

No financial institution shall-

a) accept any such deposit as is repayable on demand through cheque, draft or order of the
depositor;
b) deal in gold or any foreign coins;
c) grant credit facilities in excess of thirty per cent or, subject to the consent of the Bangladesh
Bank, of hundred per cent of its capital to any particular person, firm, corporation or
company or any such company, person or group as controls or exerts influence on such
person, ,firm, corporation or company;

d) grant credits in excess of 50 per cent of its credit facilities or in excess of such percentage of
its credit facilities as the Bangladesh Bank may determine from time to time;

e) grant any unsecured advance, credit or credit facilities to any firm in which any of its
directors, individually or jointly, is interested directors unless the total amount of such
facilities does not exceed 10 per cent of its paid-up share capital and reserves;
f) grant, in the manner mentioned in clause e), advances, credits or credit facilities in excess of
Taka 500 000 to any person or group of persons other than those stated in the said clause.

Explanation

1) ln this sub-section, "director" includes also the wife, husband, father, mother, son, daughter, son-
in-law, daughter-in-law, father-in-law and mother-in-law of a director.

2) "Unsecured advance", "unsecured credit" or "unsecured creditfacilities" as mentioned in sub-

section (f ) (e) mean any advance, credit or credit facilities granted without security or surety, and
shall include, in the case of advances, credits or credit facilities granted against securities or
sureties, that part of the credit which exceeds the market value of the securities or sureties and,
in the case that, in the opinion of the Bangladesh Bank, securities or sureties have no market
value, the amount settled by the said Bank.

3) No financial institution shall grant any advance or credit allowing its own shares as securities or
grant credits or advances to any other institution for the purpose of buying and selling its own
shares.

4) Where there arises any loss as a result of the granting of any unsecured advance, credit or credit
facilities in contravention of the provisions of sub-section (1), allthe directors of the financial
institution shall, jointly and individually, be responsible for the compensation.

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 Corporute Laws and Practices

15. Restrictions regarding the business of financial institutions

(1) No financial institutionshall, alone or in a body, be engaged in any wholesale or retail business
including export and import trade otherwise than for the purpose of carrying on its financing
business.

(2) No financial institution

shall carry on any business other than the business of financing and such
business as has been mentioned in this Act.

15. Restrictions on investments:

No financial institution shall expend or use more than 25 per cent of its paid-up capital and reserves for
the acquisition or holding of any kind of shares of financial, commercial, agricultural or industrial
institutions or of any similar institution and shall, as fast as possible, sellto the institutions concerned the
shares acquired in the interest of realizing the credits granted by it:

Provided that any financial institution may, subject to its application and on consent of the Bank, expend
or use up to 50 per cent of its paid-up capital and reserves for the acquisition and holding of the
abovementioned kind of shares.

17. Restriction on the possession of immovable property:

No financial institution may acquire or possess immovable properties exceeding in value 25 per cent of its
paid-up capital and reserves:

Provided that nothing contained in this section shall be applicable in the case of immovable property
required for the granting of facilities to employees of the financial institution and in the case of property
acquired in the interest of realizing unrealized credits granted by it.

18. Power of the Bangladesh Bank to regulate certain matters:

The Bangladesh Bank may by order regulate the following matters, namely

b) the highest rate of interest to be paid by financial institutions on various kinds of deposits,

c) the highest amount of credit to be taken by financial institutions from any person,
d)
e) the last date for repayment of credits granted by financial institutions,
f) the highest rate of interest to be paid on various kinds of credit granted by financial institutions
and the manner in which to calculate such rate,

g) the upper limit of credits granted by financial institutions in favor of any person,

h) the reserves to be maintained by financial institutions at the Bangladesh Bank,

i) other matters to be regulated in the public interest or for the development of monetary policy

245 lIl*g*
 Corporute Luil,s and Practices

D. Maintenance of minimum liquid assets

19. Maintenance of liquid assets:

(1) Every financial institution shall maintain such liquid assets as the Bangladesh Bank may
determine from time to time.

(2) For the purposes of this section, "liquid assets" means-

a) notes and coins current in Bangladesh,

b) net balances of the banks of Bangladesh,
c) the amount of call money in Bangladesh,
d) Bangladesh Treasury Bills,
e) and shall include such other assets as the Bangladesh Bank may determine.

E. lnspection
20. lnspection:

(1) Notwithstanding anything to the contrary contained in the Companies Act, the Bangladesh Bank
may at any time, by one or more of its officers, carry out an inspection of any financial institution
and its ledgers and accounts.

(2) The Bangladesh Bank may at any time, if it has reason to believe that any financial institution is
engaged in such business as is detrimentalto the interests of its depositors and debtors, or that its
assets are not sufficient to pay the claims of the public, or that it is involved in any activities
incompatible with the provisions of this Act, carry out, by one or more of its officers, an
examination, not being prejudicialtothe provision of sub-section (1), of the ledgers, account-books
and other documents of such financial institution.

(3) For the purpose of applying the powers under the sub-sections (1) and (2), the Bangladesh Bank
may appoint any auditor besides the auditor or auditors appointed by the financial institution
under section 2LO of the Companies Act.

(4) Every financial institution affected by an inspection or examination under this section shall co-
operate with the officers of the Bangladesh Bank entitled to have access to its ledgers, account-
books and other documents and shall be bound to furnish, in the interest of carrying out the
examination, any information and opportunity:

Provided that such ledgers, account-books and other documents shall not be submitted at such time or in
such place as may obstruct the normal daily activities of the financial institution concerned.

21. !nformation on inability to meet demands:

lf any financial institution has reason to be doubtful about its ability to meet the demands of its
customers or if any financial institution is forced to suspend the demands of any of its customers, it shall
inform the Bangladesh Bank about the matter.

2461F ag*
 Corporute Laws and Practices

22. Measures to be taken by the Bangladesh Bank in the case of failures of a financial institution:

(1) lf any financial institution informs the Bangladesh Bank about its inability to meet its demands in
accordance with the provisions of section 21. or if the Bangladesh Bank has, on an inspection
under section 20, reason to believe that a financial institution carries on its business in a manner
which is detrimental to the interests of its depositors, or that it has become financially insolvent
or that a financial institution is in a situation to be almost unable to pay its dues, or that a
financial institution has contravened, or failed to comply with, the conditions of a license granted
to it, the Bangladesh Bank rnay, after giving reasonable opportunity to the financial institution
concerned to submit a statement, take, by order, all or any of the following measures, which such
institution shall be bound to observe, namely:

a) it may direct the actions to be done or not to be done in connection with its financing
business;
b) it may direct the appointment, at its expense, of any person for the proper management of its
busi ness;
c)it may assume the responsibility for the control and management of its business or direct any
other person therefore.

(2) The Bangladesh Bank may, by itself or in view of an application, alter or withdraw any measure
taken under sub-section (1) and may impose such conditions on such alteration or withdrawal as
may be required.

(3) Notwithstanding anything contained in this section, the Bangladesh Bank may apply to the High
Court Division for the winding-up of any financial institution for the reasons mentioned in this
section.

(4) Where the Bangladesh Bank assumes the responsibility for the control of a financial institution, it
shall control it so long as it is not satisfied that it is no longer necessary to control its business in
order to protect the interests of its depositors, and such institution shall be bound to grant the
Bangladesh Bank every facility required in order to facilitate such control or general management
of the financial institution.

(5) The Bangladesh Bank shall determine the remuneration to be paid to any person appointed to
control or manage a financial institution under this section or the other conditions etc. of his
work, and the financial institution shall bear the expenses thereof and such other expenses as
may arise through its control.

F. Submission of statement of accounts and audit of accounts

23. Submission of statement of accounts to the Bank:

The directors of every financial institution shall submit to the Bangladesh Bank a copy of the profit and
loss account and balance sheet prepared in accordance with the Companies Act.

247 1|3ag*
 Corporate Laws and Practices

24. Appointment of an auditor and duties of the auditor:

1) Notwithstanding anything contained in the Companies Act, every financial institution shall
annually, subject to the consent of the Bangladesh Bank, appoint one auditor.

2l lf a financial institution fails to appoint an auditor, or if it is, in the opinion of the Bangladesh
Bank, necessary to appoint an additional auditor together with the auditor appointed under sub-
section (1), the Bangladesh Bank may appoint an auditor for such institution and shall fix the
remuneration due to him.

3) An auditor appointed under this section shall have the duty to audit the accounts of the year for
which he has been appointed and to prepare a report on the basis thereof.

4) The Bangladesh Bank may, in addition to those stated in sub-section (3), impose such other
duties on the auditor as it may determine, and the auditor shall receive an additional
remuneration for the discharge of such additional duties.

5) The report of the auditor prepared under this section shall be attached to the balance sheet and
profit and loss account and a copy thereof shall be send to the Bangladesh Bank.

6) Where an auditor discharging his duty as an auditor of a financial institution is satisfied to the
effect that-
a) the provisions of this Act have been seriously contravened or have not been complied with or
that a financial institution has committed a criminal offense of fraud or dishonesty;

b) on account of losses the capital of a financial institution has fallen under eighty-five per cen!

c) there has occurred any serious irregularity including that the payment of the creditors' demands
is no longer guaranteed; or

d) that there exists any doubt as to the sufficiency of the assets to meet the demands of the
creditors; he shall without any delay inform the Bangladesh Bank on the said matters.

25. Managing Directors etc. not being qualified:

1) No person who is, or at any time has been, adjudicated insolvent, or has suspended payment of
his creditors, or has compounded with his creditors, or who has been convicted by a criminal court
of an offence involving moral turpitude may be or continue to be director of a financial institution
or be appointed for the management of a financial Institution.

2) No director of a financial institution declared suspended under this Act or person directly involved
in the management of such financial institution may, without the prior approval of the Bangladesh
Bank, be appointed to the office of a director of another financial institution or to any office which
may be connected with the management of another financial institution.

3) Notwithstanding anything contained in any other law for the time being in force, no person who is
director of any other financial institution, of a banking company or of an insurance company shall
be qualified to be director of a financial institution.

248 11'**xe
 Corporate Luws and Practices

26. Removal of a chairman, principal executive officer, board of directors or of any director:

1) Where the Bangladesh Bank is satisfied that it is necessary to remove a chairman or director or
principalexecutive officer of a financial institution in orderto prevent its affairs being conducted
in a manner prejudicial to the interests of the financial institution or its depositors or to secure
in the public interest the proper management of the financial institution, it may, after
committing its reasons to writing, issue a direction that such chairman, director or principal
officer be removed from his office.

2) Before issuing a direction under sub-section (1), the person affected shall be given reasonable
opportunity to make a representation.

G. Moratorium in respect of financia! institutions, reconstruction etc.

27. Moratorium, reconstruction and amalgamation

1) Where it appears to the Bangladesh Bank that there are reasons to make, in the interest of the
depositors, an order of moratorium in respect of a financial institution, it may make an order of
moratorium suspending the business of such financial institution for a period of no more than six
months:

Provided that the Bangladesh Bank may extend such period for a further period of no more than six
months.

2) lf during the period the order given under sub-section (1) is in force the Bangladesh Bank is
satisfied that in the public interest or in the interest of the depositors or in order to secure the
proper management of the financial institution or in the interest of the finance system of the
country as a whole it is necessary so to do, it may prepare a scheme for the reconstruction of the
financial institution, or for the amalgamation of the financial institution with another financial
institution, henceforth in this chapter referred to as the transferee institution.

3) The aforesaid scheme may contain all or any of the following items, namely:

a) the name, registration, capital, assets, power, rights, interests, authorities, facilities, liabilities
and duties of the financial institution on its reconstruction or, as the case may be, of the
transferee institution;
b) in the case of amalgamation of the financial institution, the transfer to the transferee
institution of the business, properties, assets and liabilities of the financial institution on such
conditions as are specified in the scheme;
c) any change in the Board of Directors, or the appointment of a new Board of Directors, of the
financial institution on its reconstruction or, as the case may be, of the transferee institution
and the authority by whom, the manner in which, and the conditions on which, such change
shall be made and in the case of appointment of a new Board of Directors, the period for
which the appointment shall be made;
d) the alteration of the memorandum and the articles of association of the financial institution
on its reconstruction or, as the case may be, of the transferee institution for the purpose of

2491F*g*
 Corporate Laws and Practices

altering the capital thereof or for such other purposes as may be necessary to give effect to
the reconstruction or amalgamation;
e) the continuation by or against the financial institution on its reconstruction or, as the case
may be, the transferee institution, of all actions and proceedings filed by or against the
financial institution concerned and pending immediately before the date of the order of
moratorium under sub-section (1);
f) the reduction of the interests or rights which the members, depositors and other creditors of
the financial institution have before its reconstruction or amalgamation to such extent as the
Bangladesh Bank considers necessary in the public interest, or in the interest of the
members, depositors and other creditors of the financial institution, or for the maintenance
of the business of the financial institution;
g) payment in cash to the depositors and other creditors in full satisfaction of their claims-
i) in respect of their interests or rights in or against the financial institution before its
reconstruction or amalgamation; or
ii) where their interests or rights in or against the financial institution have been reduced
under clause f), in respect of such interests or rights as so reduced;
h) the allotment of shares in the financial institution on its reconstruction or, as the case may
be, in the transferee institution to the members of the financial institution for all the shares
of the financial institution held by them before its reconstruction or amalgamation or where
has been made a reconstruction in accordance with clause f), for those reduced shares and
where cash is claimed instead of shares or where it is not possible to allot shares to any
member, the payment in cash to those members in full satisfaction of their claims-
i) in respect of their interest in shares in the financial institution before its reconstruction
or amalgamation; or
ii) where such interest has been reduced under clause f), in respect of their interest in those
reduced shares;

i) the continuance of the services of all the employees of the financial institution on its
reconstruction or, as the case may be, in the transferee institution at the same remuneration
and on the same conditions, which they were getting or under which they were employed
before an order of moratorium under sub-section (1) has been given:
Provided that before the expiry of the period of three years from the date on which a scheme
under this section is sanctioned by the Government-

i) the financial institution on its reconstruction shall determine for its employees the same
remuneration and the same benefits as are, at the time of such determination, enjoyed
by employees of corresponding rank of a comparable financial institution, and in respect
of settling whether financial institutions are comparable or whether employees are
holding corresponding ranks the decision of the Bangladesh Bank shall be final;
ii) the transferee institution shall determine for the employees of the former financial
institution the same remuneration and the same benefits as are applicable to its own
employees subject to the qualifications and experience of the said employees being
comparable to those of its own employees, and if any doubt or difference arises as to
qualification or experience, that doubt or difference shall, before the expiry of a period of
three years from the date on which the remuneration and other benefits have been
determined, be referred to the Bangladesh Bank whose decision thereon shall be final;

250 1F*gi:
 Corporate Laws and Practices

j) notwithstanding anything contained in clause h), where any of the employees are specifically
mentioned in the scheme, or where any of the employees have, at any time before the expiry
of one month following the date on which the scheme is sanctioned by the Government,
expressed their intention of not becoming employees of the financial institution on its
reconstruction or of the transferee institution, the payment to such employees of
compensation, pension, gratuity, provident fund and other retirement benefits;
k) any other rule or condition for the reconstruction or amalgamation of the financial
institution;
l) incidental, consequential and supplemental matters required to carry out the reconstruction
or amalgamation.

4) The Bangladesh Bank shall send a copy of the scheme prepared under this section in draft to the
financial institution, the transferee institution and any other financial institution concerned, for
suggestions and objections within such period as it may specify.

5) The Bangladesh Bank may make such modifications in the draft scheme as it may consider
necessary after considering the suggestions and objections received in the light of the invitation
under sub-section (4).

6) The Bangladesh Bank shall, after proceeding in accordance with sub-section (5)
and (6), place the
scheme before the Government for its sanction, and the Government shall sanction
the scheme
without any modifications or with such modifications as it may consider necessary, and the
scheme as sanctioned by the Government shall come into force on such date
as the Government
may specify on this behalf:

Provided that different dates may be specified for the commencement of

different provisions of the
scheme.

7) Upon the coming into force of the scheme or any provision thereof, the scheme
or such provision
shall be binding on any of the following persons and institutions, namely:-

a) the financial institution, the transferee institution and any other financial institution
concerned with the amalgamation;

b) the members, depositors and other creditors of the financial institution concerned;
c) the said financial institution and the employees of the transferee institution;
d) any trustee involved in the management of ant retirement fund or any other
fund, kept by
the said financial institution or the transferee institution or any person having any
right or
liability in relation to that financial institution or transferee institution.

8) The properties, assets and liabilities of the financial institution shall, from the date on which
the
scheme comes into force and to such extent as may be stated in the scheme,
be properties,
assets and liabilities of the transferee institution.

9) lf any difficulty arises in giving effect to the provisions of the scheme, the Government
may by
order do anything not inconsistent with such provisions which appears to it necessary
for the
purpose of removing that difficulty.

251 I P:r g *
 Corporate Laws and Pructices

10) Where a scheme for amalgamation of a financial institution under this section has been
approved, any business acquired by the transferee institution under the scheme or under any
provision thereof shall, after coming into operation of the scheme or such provision, be carried
on in accordance with the law governing the activities of the transferee institution:
provided that, in order to give full force to the scheme, the Government may, on the recommendation of
the Bangladesh Bank, by notification in the official Gazette, exempt for a period of no more than seven
years that business from the application of any provision of that law.

11) Nothing in this section shall prevent the amalgamation by a single scheme of several financial
institutions in respect of each of which an order of moratorium has been made.

12) The provisions of this section and of any scheme made under it shall have effect notwithstanding
anything contained in any other provision of this Act or any cther Act or any agreement or any
other kind of instrument for the time being in force'

28. Amalgamation of financial institutions:

1) No financial institution ffioy, without the prior approval of the Bangladesh Bank, be
amalgamated with any other financial institution or acquire the majority of shares in any other
financial institution.

2) The Bangladesh Bank may, in the interest of considering an application for prior approval under
sub-section (1), call for any information from the applicant, and it shall not cancel an application
without giving reasonable opportunity for a hearing to the applicant.

29. Winding up of financial institutions by the High Court Division:

Notwithstanding anything contained in the Companies Act, the High Court Division may, on the basis of
an application of the Bangladesh Bank, order the winding up of a financial institution, if-

a) the license of the financial institution has been cancelled;

b) the financial institution is unable to pay its debts;
c) the financial institution has been punished for the contravention of any provision of this Act.

Offences and punishments

30. punishment for carrying on the business of financing without holding a license.-

Whoever carries on the business of financing without holding a license under this Act or continues to
carry on the business of financing after the annulment of his license shall be punishable with
imprisonment for a term which may extend to two years, or with a fine which may extend to five
hundred thousand Takas, or both.

2521? * g *.
 Corporate Luws and Pructices

31. Punishment for not cooperating in an investigation under section 5.-

(1) lf any suspect engaged in the business of financing at the time of an investigation under
section 5 intentionally refuses to produce any information, documents, files, books, accounts
or records required for the investigation to the officer conducting the investigation or refuses
to cooperate in the investigation, he shall be punishable with imprisonment for a term which
may extend to one year, or with a fine which may extend to two hundred thousand Takas, or
both.
(2) lf any person accused under sub-section (1) disregards an order to deposit at a court any
information or records mentioned in the said sub-section, he shall be punishable with the
punishments mentioned in the said sub-section.

32. Punishment for giving false information in order to receive a Iicense:

Whoever intentionally gives false or erroneous information in an application for a license under this Act
shall be punishable with imprisonment for a term which may extend to three years, or with a fine which
may extend to one million Takas, or both.

33. Punishment for not complying with the conditions of a license:

lf any person fails to comply with any condition of a license granted under this Act, he shall be punishable
with a fine which may extend to one million Takas, and if he fails to comply with the conditions
concerned after having been adjudicated culpable, with a fine amounting to one hundred thousand Takas
for every day during which the offence continues.

34. Punishment for contravention of the provisions of section 7:

lf anyfinancial institution carries on the business of financing in its branches in contravention of the
provisions of section 7, it shall be punishable with a fine amounting to one hundred thousand Takas for
every day during which the offence continues.

35. Punishment for contravention of the provisions of section 14:

lf any financial institution grants credit facilities in contravention of the provisions of section 14, it shall
be punishable with a fine which may extend to two million Takas.

35. Punishment for failure to maintain liquid assets:

lf any financial institution fails to maintain liquid assets in accordance with the provisions of section 19, it
shall be punishable with a fine at the rate of one per cent for every day during which the offence
contin ues.

37. Punishment for failure to produce account books etc. during an investigation under section 20.-

lf any financial institution fails to

produce any account books, accounts, information or any other
necessary documents during an inspection under section 20, it shall be punishable with a fine which may
extend to five hundred thousand Takas.

38. Punishment for disregarding the regulations of the Bangladesh Bank:

lf any financial institution disregards the measures taken by the Bangladesh Bank under section 22, it
shall be punishable with a fine amounting to two million Takas.

?51 1i,.u,.
 Corporate Laws and Practices

39. Punishment for persons who, being disqualified in accordance with section 25, are connected with
financial institutions:

lf any person who is disqualified in accordance with the provisions of sub-section (1) and (2) of section 25
is connected with any financial institution in contravention of the said provisions, he shall be punishable
with a fine which may extend to one million Takas, or with imprisonment for a term which may extend to
three years, or both, and if any person becomes director of any financial institution in contravention of
sub-section (3) of the said section, he shall be punishable with a fine amounting to one hundred
thousand Takas.

40. Punishment for falsely introducing oneself as a financial institution:

lf any institution, not holding a license under this Act, introduces itself, and carries on business, as a
financial institution holding a license, each owner, shareholder, director, manager, secretary or other
officer or agent of the said institution shall be punishable with a fine which may extend to one million
Takas, or with imprisonment for a term which may extend to three years, or both, unless he can prove
that the said contravention did occur without his knowledge, or that he tried to the best of his abilities to
prevent the said contravention, or that he was in no way involved in the said contravention.

41. Punishment for adding anything untrue in account books etc. of financial institution:

(1) lf any director, manager, auditor, responsible person, officer or employee of a financial
institution intentionally adds, or abets to add, anything untrue in the account books, accounts,
reports, business papers or other documents, hereafter referred to as the said documents, of
the said institution, or conceals or destroys anything in the said documents, he shall be
punishable with a fine which may extend to one million Takas, or with imprisonment for a term
which may extend to three years, or both.
(2) lf any person intentionally gives any false information in any statement, report or other
document called for or submitted in accordance with the requirements of, or under, or for the
purpose of, any provision of this Act or intentionally holds back any necessary information in
any such statement, report or document, he shall be punishable with the punishments
mentioned in sub-section (1).

42. Punishment for offences for which no punishment has been provided for:

Whoever does, or desists from doing, anything which comprises non-compliance with any provision of
this Act or with any order or direction passed thereunder and for which no punishment has been
expressly provided in this Act shall be punishable with a flne which may extend to one hundred thousand
Ta kas.

43. Power of the Bangladesh Bank to impose fines:

(1) lf any person has committed a punishable offence.under the sections 31, 33, 34,35,36,37,38,
39 and 42,the Bangladesh Bank may, not filing a suit against him, give him opportunity to show
the reason for which he should not be punished with a fine and may, if it is not satisfied with
his explanation or if he has not given any explanation, punish him with a fine which may extend
to the highest amount fixed by the said Bank.
(2) lf the person concerned pays the fine within fourteen days from the date on which it had been
imposed under sub-section (1), no legal proceeding shall be taken against him for the offence
committed by him: but if he fails to pay the fine within the said period, the Bangladesh Bank
shall file a suit at a court against the person concerned for the offence committed by him.

)\4 ltt ,."

'"'t":'
 Corporate Laws and Pructices

H. Miscellaneous

44. Cognizance of offence:

(1) No court other than a sessions court shall try any offence under this Act.

(2) No court shall take cognizance of any offence under this Act without a complaint in writing by
the Bangladesh Bank or by an officer authorized in this behalf by the Bangladesh Bank.

45. Publication of list of financial institutions:

(1) The Bangladesh Bank shall, immediately after the granting of a license to a financial institution,
publish by notification the name and address of the said institution.
(2) The Bangladesh Bank shall annually before the month of July supply to the Government a list
of the financial institutions which have received a license under this Act.

46. Alteration of memorandum of a financial institution:

(2) Notwithstanding anything contained in the Companies Act, no application for the confirmation
of the alteration of the memorandum of a financial institution shall be maintainable unless the
Bangladesh Bank certifies that there is no objection to such alteration.

(3) lf any financial institution contravenes the provision of sub-section (L), it shall be punishable
with a fine amounting to fifty thousand Takas for every day, beginning with the date on which
the contravention occurred.

47. Actions taken in good faith:

No suit or other legal proceeding shall lie against the Government or the Bangladesh Bank or against any
of its officers or employees for anything which is in good faith done or intended to be done under this
Act, or for any damage caused or likely to be caused by anything intended to be done in good faith.

48. Power to exempt in certain cases:

The Bangladesh Bank may, after consultation with the Government, declare, by notification in the official
Gazette, that any or all of the provisions of this Act shall not apply to any financial institution or to any
particular financial institution either generally or for such perlod as may be specified in the notification.

49. Power to make rules:

(1) Forthe purpose of this Act, the Bangladesh Bank may, after consultation with the Government
and by notification in the official Gazette, make rules.
(2) ln particular, and without prejudice to the generality of the foregoing power, by such rules-
a) may be determined the fees which are to be determined under this AcU

b) may be controlled the advertisement of financial institutions.

 Corporute Laws und Practices

lnteractive Question 1:

Akij Bangla Limited is one of the largest localfamily businesses operating in allcorners of the country. As
present, the company has following three business wings:
a, FMCG
b. Construction Materials
c. AgriculturalProducts

ln last decade, the company has experienced significant business growth and accumulated huge amount
of cash awaiting to be reinvested. Managing Director of the company has come up with an idea of
opening a fourth business wing which will make loans and advances for industries, commerce,
agriculture or building construction. As the country is going through an economic transition, there is
extensive demand for finance out there in the market. Therefore, Managing Director is keen to start this
financing business quickly within the existing business set up of the company. He is in the view that as
the company already has a registration under Companies Act, it can simply introduce financing products
making necessary modification to its MOA.

Before going to detail investment plant, the company has approached to you for advice on preliminary
feasibility of the above business plan. Advise.

Summory ond Self-test

L. Explain the term 'financial institution'as defined in the Financial lnstitution Act, 1993. Narrate

the circumstances under which the license of a financial institution may be cancelled?
2. Explain the restrictions regarding credit facilities of a financial institution.

3. ABC Financing limited is operating in the financing industry since 1980s. By virtue of the financing
business, the company has gained significant know how of different types of wholesale and retail
business. As a diversification plan, the company is considering if it can start a side business of
wholesale goods in addition to the financing business.

Explain the restrictions regarding the business of financial institutions

2561F:ige
 Corporate Laws und Practices

Answers to Self-test

L. Financia! institution means such non-banking financial institutions, which-

i) make loans and advances for industries, commerce, agriculture or building construction; or

ii) carry out the business of underwriting, receiving, investing and reinvesting shares, stocks,
bonds, debentures issued by the Government or any statutory organization or stocks or
securities or other marketable securities; or

iii) carry out instalment transactions including the lease of machinery and equipmenU or

iv) finance venture capital; and shall include merchant banks, investment companies, mutual
associations, mutual companies, leasing companies or building societies;

Cancellation of a license: (1) Bangladesh Bank may cancel the license of a financial institution
granted under this Act on account of the following reasons, namely:

a) if it does not carry on the business for which it had been established;
b) if the financial institution goes into liquidation or if its business is closed;
c) if it furnishes false or misleading information or documents in order to receive a license;
d) if it carries on its business in a manner detrimentalto the interests of the depositors;
e) if its assets are not sufficient to pay the claims of its depositors;
f) if it carries on business maintaining an amount of paid-up capital which is less than the
amount of the minimum capital;

g) if the conditions of the license are contravened;

h) if the financial institution or any of its directors is convicted for an offence under this Act.

(2) Notwithstanding anything contained in sub-section (1), no license of a financial institution shall
be cancelled without granting, through no more than fifteen days' notice in writing before the
cancellation of the license of the financial institution, an opportunity to show the reasons for
which its license should not be cancelled.

2. Restrictions regarding credit facilities

No financial institution shall-

a) accept any such deposit as is repayable on demand through cheque, draft or order of the
depositor;
b) deal in gold or any foreign coins;
c) grant credit facilities in excess of thirty per cent or, subject to the consent of the Bangladesh
Bank, of hundred per cent of its capital
to any particular person, firm, corporation or company or
any such company, person or group as controls or exerts influence on such person, firm,
corporation or company;
 Corporate Laws and Practices

d) grant credits in excess of 50 per cent of its credit facilities or in excess of such percentage of its
credit facilities as the Bangladesh Bank may determine from time to time;
e) grant any unsecured advance, credit or credit facilities to any firm in which any of its directors,
individually or jointly, is interested directors unless the total amount of such facilities does not
exceed 10 per cent of its paid-up share capital and reserves;

f) grant, in the manner mentioned in clause e), advances, credits or credit facilities in excess of Taka
500 000 to any person or group of persons other than those stated in the said clause.

3. Restrictions regarding the business of financial institutions:

(1) No financial institution shall, alone or in a body, be engaged in any wholesale or retail
business including export and import trade otherwise than for the purpose of carrying on its
financing business.

(2) No financial institution shall carry on any business other than the business of financing and
such business as has been mentioned in this Act.

258lPage
 Corporate Laws and Practices

Answers to lnteractive questions

1. No person shallcarry on anyfinancial business without a license to run a financialinstitution

issued by the Bangladesh Bank.

Question ABC Company Limited, a non-banking financial institution, listed in both the stock
exchanges in Bangladesh has authorized share capital of BDT 2.50 billion divided into
250.00 million ordinary shares of BDT 10.00 each. Currently, paid up capital of the
Company is 1.75 billion. The management proposes to increase the paid up capital of
the Company through issuance of Right Shares in the ratio of l-:1 at a price of BDT
15.00 per share. The next Board meeting of the Company will be held on December 30,
2016 where the proposal of issuance of Right Shares will be placed. The management
of the Company requested to advise them regarding the procedures to be followed for
successful completion of the Right lssue. ln this regard you are requested to give your
advices on the formalities/compliance to be completed with regard to the provisions
of:

i) The Companies AcL,1994;

ii) The rules and regulations of Bangladesh Securities and Exchange Commission; and

iii) The Financial lnstitutions Act, 1993.

Answer Recommendation of the Board of Directors of ABC Company Limited for issuance of
Right Shares is Price Sensitive information. lf the management proposal is approved,
the information must be disseminated to Bangladesh Securities and Exchange
Commission and the Stock Exchanges within half an hour of taking the decision by the
Board. Moreover, the information shall be published in at least in two national daily
newspapers, one in Bengali and another in English. The same shall also be published in
one online newspaper and be made available in the website of ABC Company Limited.
Price Sensitive information shall include the followings:

a) Ratio of Right Shares recommended. ln the mentioned case it is 1:1;

b) Date of the Extra-Ordinary General Meeting of the Company;

c) Record date for the purpose of Extra-Ordinary General Meeting (complying

with the regulations of BSEC); and
d) Venue of the Extra-Ordinary General Meeting. However, the venue may be
declared at a later date.

The Company needs to increase its Authorized Share Capital minimum up to such
amount so that after issuance of the Right Shares total paid up capital of the Company
remains below the increased Authorized Share Capital of the Company. lncrease of
Authorized Share Capital is also Price Sensitive information and shall be disseminated
to Bangladesh Securities and Exchange Commission and the Stock Exchanges
accordingly.

) 5c)
 Corporute Laws ancl Pructices

Both increase of Authorized Share Capital and issuance of Right Shares in the ratio of
L:1must be approved bythe shareholders in the General Meeting of the Company. For
this purpose, notice shall be served by the Company at least 21 days before the date of
the General Meeting where the proposed resolution shall be mentioned,

For the purpose of increasing the Authorized Share Capital of the Company necessary
changes needs to be made in the capital clause of the Memorandum of Association
and Articles of Association of the Company. As per provisions of The Financial
lnstitutions Act, 1993 "No Objection" from Bangladesh Bank shall be taken to make the
necessary changes in the Memorandum of Association and Articles of Association of
the Company. After obtaining NOC from Bangladesh Bank, revised Memorandum of
Association and Articles of Association of the Company shall be submitted to the
Registrar of Joint Stock Companies for its approval and certified copy of the same shall
be obtained.

For the purpose of issuance of the Right Shares the financial statements of the
Company need to be audited by a firm of Chartered Accountants. The issuer Company
must ensure that its CIB report is clean with Bangladesh Bank. lf it is not updated that
must be updated before submission of application to Bangladesh Securities and
Exchange Commission.

Manager to the issue, Underwriter, Bankers to the issue shall be appointed.

Application will be submitted to Bangladesh Securities and Exchange Commission
along with the required documents as prescribed. The company needs to complete its
credit rating by a credit rating company, since the offer is at a premium. The financial
statements of the Company need to be audited for that period based on which the
right offer will be exercised.

After approval of the Right lssue by Bangladesh Securities and Exchange Commission
the information shall be disclosed as Price Sensitive lnformation and another Record
Date shall be fixed for the purpose of entitlement of the right shares.

Subscription opening date & closing date shall be declared and subscription shall be
collected accordingly. All post subscription issues/matters including complain of the
shareholders, if any, shall be addressed as per regulations of BSEC'

Periodic reports relating to the Right lssue shall be submitted to BSEC. Share allotment
will be uploaded in the CDBL data base. Return of Allotment will be submitted to RJSC
and certified copy of the same to be obtained.

260 ltlrgi:
 Corporute Laws und Pructices

Chapter 5

Foreign Exchange Regulations, L947

GUIDELINES FOR FOREIGN EXCHANGE TRANSACTIONS

Chapter 1: lntroduction and Definitions

Chapter 2 Section l: Authorized Dealers and Money Changers

Section ll: lnstructions for Money Changers

Chapter 3 Bangladesh Bank's Transactions with ADs

Chapter 4: Section 1": Foreign Currency Accounts of the ADs and Purchase and Sale of Foreign
Cu rrency
Section ll: Forward Dealings in Foreign Exchange

Section lll: Hedging the Price Risk of Commodities

Section lV: Non-Resident Taka Accounts of Foreign Bank Branches and Correspondents

Chapter 5 Section 1: Outward Remittances

Section ll: lnward Remittances

Section lll: Dealings in Foreign Currency Notes and Coins Etc.

Chapter 6 lmport and Export of Currency Notes and Coins, Foreign Exchange, Gold, Silver, Jewellery
and Securities Etc.

Chapter 7 Section 1: lmports

Section ll: Letters of Credit and Remittances against lmports

Section lll: Back to Back LCs

Section lV: Deposit of Counterpart Fund in respect of lmports under Non Project
Commodity Loa ns/Credits/G rants

Chapter 8 Section 1: Exports

Section ll: Exports from the Export Processing Zones

261 113 rz g*
 Corporate Laws and Practices

Chapter 9 Section 1: Foreign lnvestment in Bangladesh

Section ll: Operations in Securities

Chapter 10: Commercial Remittances (Other than for lmports)

Chapter 11: Private Remittances

Chapter 12: Travel

Chapter 13 Section 1: Private Foreign Currency Accounts

Section ll: Non-Resident Foreign Currency Deposit Accounts

Section lll: Resident Foreign Currency Deposit Accounts

Section lV: Exporter's Retention Quota Accounts

Section V: Foreign Currency Accounts for the EPZ Companies

Section Vl: Other Foreign Currency Accounts

Chapter 14: Section 1: Convertible and Non-convertible Taka Accounts

Section ll: Private Non-Resident Taka Accounts

Section lll: Non-Resident Blocked Taka Accounts

Section lV: Non-Resident lnvestor's Taka Accounts (NITA)

Chapter 15 Borrowing Abroad by Residents

Chapter 16 Section l: Loans, Overdrafts and Guarantees

Section ll: Credit Facilities to lndustries in Export Processing Zones

Chapter 17 Section l: Foreign Exchange Transactions for Agency Services

Section li: Transaction with branch offices, Liaison offices, representative offices and
other places of business in Bangladesh established under section 18b (1) of the foreign
exchange regulation act, L947.

Section lll: Foreign Exchange Transactions Of Freight Forwarders

Chapter 18: Section l: lnsurance Business

Section ll: Reinsurance

Chapter L9 Payment Through I nternational Cards

Chapter 20 Foreign exchange transactions by the enterprises of Economic Zones (EZs) in

Bangladesh.

APPENDIX 1 THE FOREIGN EXCHANGE REGULATION ACT, 1947 (VU OF 1947) (As amended up to
September 09, 2015)

APPENDIX 2: GUIDELINES FOR FOREIGN EXCHANGE TRANSACTIONS (Volume 2)

262 | 11 :r '; ;:
 Corporute Laws and Practices

CHAPTER 1: INTRODUCTTON AND DEFINITIONS

1. Foreign Exchange Regulation (FER)Act, 1947 (Act No. Vll of 1947) enacted on 11th March, 1947 in the
then British lndia provides the legal basis for regulating certain payments, dealings in foreign
exchange and securities and the import and export of currency and bullion. This Act was first adapted
in Pakistan and then in Bangladesh. The Act is reproduced at Appendix 1". Bangladesh Bank is
responsible for administration of regulations under the Act. Appendix 4 provides a list of Bangladesh
Bank's offices and their jurisdictions.

2. Basic regulations under the FERAct are issued by the Government as well as by the Bangladesh Bank
in the form of Notifications which are published in the Bangladesh Gazette. Notifications issued by the
Bangladesh Government and the erstwhile Government of Pakistan and the Bangladesh Bank and the
erstwhile State Bank of Pakistan are reproduced at Appendices 2 and 3. Directions having general
application are issued by the Bangladesh Bank in the form of notifications, FE (Foreign Exchange)
circulars, SPA circulars and circular letters.

3 Authorized Dealers (ADs) in foreign exchange are required to bring the foreign exchange regulations
to the notice of their customers in their day-to-day dealings and to ensure compliance with the
regulations by such customers. The ADs should report to the Bangladesh Bank any attempt, direct or
indirect, of evasion of the provisions of the Act, or any rules, orders or directions issued thereunder.

4 The ADs must maintain adequate and proper records of all foreign exchange transactions and furnish
such particulars in the prescribed returns for submission to the Bangladesh Bank. They should
continue to preserve the records for a reasonable period for ready reference as also for inspection, if
necessary, by Bangladesh Bank's officials.

5. This publication summarizes the instructions issued under the FER Act as well as the prudential
instructions issued by Bangladesh Bank (as of 31- May, 2009) to be followed by ADs and Money
Changers in their day-to-day foreign exchange transactions.

6 Specimen forms (other than those of periodical returns dealt with in Volume-2) prescribed in this
publication are given in Appendix- 5, while Appendix- 6 contains (i) Notification issued by the Board of
lnvestment for obtaining loan from abroad by industrial enterprises in Bangladesh in the private
sector (ii) Policy Guidelines for establishment of Drawing Arrangement between the Exchange Houses
abroad and Banks operating in Bangladesh (iii) List of required information/documents for seeking
permission to act under section 18A and 1-8B of Foreign Exchange Regulation Acl, 1,947 and (iv)
Guidelines to be followed to act as an agent (as Satellite Channel Distributor) of foreign principal(s)
under section 18A of Foreign Exchange Regulation Act, 1947.

7 Terms having a special meaning for the purpose of the FER Act are defined under Section 2 of the Act.
However, for the purpose of this publication and the instructions issued by the Bangladesh Bank from
time to time, the following terms as defined below shall be used in addition to those defined under
Section 2 of the FER Act, 1947.

i. Resident and Non-Resident

Section 20(1) of Foreign Exchange Regulation Acl, !947 stipulates that any person who has at any time
after the commencement of the Act been resident in Bangladesh be treated as resident in Bangladesh
until Bangladesh Bank by general or special order directs otherwise. Where such directions are given,

263 11:;r;l;
 Corporate Lsh,s und Practices

the Act also empowers Bangladesh Bank, to declare the territory in which such persons be treated as
resident. Section 20 of the said Act as a whole delineates the authority to Bangladesh Bank with
respect to resident status of any person, firm, bank, corporate body etc. and treatment of transactions
by different kind of entities. For the purpose of the said Act, ordinarily, a resident is a person, bank or
firm who/which resides/has established a place of business in Bangladesh. A person is deemed to be
ordinarily resident if he maintains a home in Bangladesh or resides in the country for a substantial part
of each year or pays income tax as a resident of Bangladesh. ln addition to that (i) in terms of Section 5
of Article ll of the schedules appended to the United Nation (Privileges and lmmunities)Act, l-948, the
accounts of United Nations and its Organizations, (ii) persons holding Office in the Service of the
Republic of Bangladesh who go abroad or who are already abroad and residing outside Bangladesh for
the time being either on duty or on leave,

(iii) foreign nationals residing in Bangladesh for work or self-employment, (iv) foreign nationals residing
in Bangladesh for study under student visa, (v) foreign nationals staying in Bangladesh with residence
visa, (vi) officials of Bangladesh Government and public sector undertakings deputed abroad on
assignment with foreign governments/organizations or posted to their own offices (including
Bangladesh Diplomatic Missions abroad) and (vii) foreign nationals residing continuously in
Bangladesh for six months or more would be treated as residents.

A non-resident is a person, bank or firm who/which resides/has a place of business outside

Bangladesh. Non-residents include Bangladesh nationals who go out of Bangladesh for any purpose.
On the other hand, the fact that a person gives an address in Bangladesh does not necessarily mean
that he should be regarded as a resident if he is, in fact, only a temporary visitor and is ordinarily
resident elsewhere.

ii. Bangladesh Bank

Bangladesh Bank (BB) means the Bangladesh Bank established under the Bangladesh Bank Order,
1-972 (President's Order No. 127 of 1972).

ilr. I aKa

Taka means the Bangladesh Taka unless otherwise specified.

iv. Dollar
Unless otherwise indicated the term dollar used in this publication shall mean the US dollar

v Authorized Dealers
Wherever used in this publication, the term Authorized Dealer or AD would mean a bank authorized
by Bangladesh Bank to deal in foreign exchange under the FER Act,1947.

vi. Money Changers

Wherever used in this publication, the term "Money Changer" would mean a sole proprietorship or
partnership firm/company licensed by Bangladesh Bank under "FER Act, L947" to act as Money
Changer for dealing in certain foreign exchange transactions as directed by Bangladesh Bank from
time to time.

264lilag*
 Corporate Luws and Pructices

CHAPTER 2: SECTION-!

AUTHORIZED DEALERS AND MONEY CHANGERS

1 Application for AD license

Bangladesh Bank issues licenses normally to scheduled banks to deal in foreign exchange. All
applications for Authorized Dealer License should be made to the General Manager, Foreign Exchange
Policy Department, Bangladesh Bank, Head Office, Dhaka with a declaration that 'Guidelines on
Managing Core Risks in Banking' (as prescribed by Bangladesh Bank vide BRPD Circular No. 17, dated
07 October,2OO3) pertaining to treasury functions in foreign exchange are already in place and all
steps have been taken by the bank for internal monitoring and supervision of the branches for carrying
out foreign exchange transactions. Besides, the bank should also provide information showing that it
has adequate manpower trained in foreign exchange and there is prospect to attract reasonable
volume of foreign exchange business in the desired location and the applicant bank meticulously
complies with the instructions of the Bangladesh Bank especially with regard to submission of
periodical returns.

2 Application for license to perform limited functions

Licenses with limited scope are also issued to persons or firms (e.g. hotels, bank booths, gift shops etc.)
to exchange foreign currency notes, coins, and travelers' cheques (TCs) in places where money
changing facilities are required. The authorizations are granted to persons or firms of adequate means
and status who, in the opinion of the Bangladesh Bank, will be able to conduct their dealings strictly in
accordance with the foreign exchange regulations. Applications for the grant of licenses with limited
scope should be made to the General Manager, Foreign Exchange Policy Department, Bangladesh
Bank, Head Office, Dhaka.

3 Money Changer license

Bangladesh Bank may also issue "Money Changer" licenses to persons/firms desirous of undertaking,
as their sole line of business, the purchase and sale of foreign currency notes, coins, TCs from and to
incoming and outgoing tourists. ADs are advised to process applications for licenses on behalf of their
customers provided Bangladesh Bank decides to issue new licenses and forward the same with
recommendation to the General Manager, Foreign Exchange Policy Department, Bangladesh Bank,
Head Office. lnstructions to be followed by the money changers are given in the section ll of this
ch a pter.

265 17)ag*
 Corporate Laws and Pructices

SECTION -II
INSTRUCTIONS FOR MONEY CHANGERS

4 Use of office space

Money Changer shall have no branch office. The premise to be used for money changing business shall
not be used for any other business activity.

5 Buying of foreign currency notes, coins and TCs

Money Changers are allowed to buy foreign currency notes, coins and TCs from incoming foreign and
Bangladesh nationals coming/returning from abroad. For each such purchase an encashment
certificate shall be furnished to the seller in prescribed format as per Appendix 5/1

6 Releasing of foreign currency notes, coins and TCs

Money Changers may sell foreign currency notes, coins and TCs only to outgoing Bangladesh nationals
against their annual private travel entitlements (per calendar year) subject to a maximum limit of USD
i-000 or equivalent in the form of cash and lor TC. Release of foreign exchange in excess of USD 200 or
equivalent shall require valid visa. Money Changers may also sell foreign currency notes, coins and TCs
to outgoing foreign nationals having duly issued encashment certificates, subject to a maximum limit
of USD 500 or equivalent by re-conversion of Bangladesh Taka proceeds of foreign exchange sold by a
tourist during his/her stay in Bangladesh. Only the Money Changer that issued the encashment
certificate can make such re-conversion.

While releasing foreign exchange for travel abroad, Money Changers shall verify and satisfy themselves
that the travel for which the foreign exchange released earlier was actually undertaken or the issued
foreign exchange was duly encashed. Each sale of foreign exchange shall be recorded in the passport
and air ticket (in case of air travel) of the outgoing passenger with seal and signature of Authorized
person of the Money Changer. For issuance of TC, signature of the buyer should be obtained on the TC
as per usual norm. ln each case of release of foreign exchange for travei abroad, photocopies of first six
pages, pages containing visa (if available) and pages containing endorsement of foreign exchange of
the passport duly signed by the Authorized person of the Money Changer with seal shall be retained at
least for five years for inspection by Bangladesh Bank Team. ln case of release of foreign exchange to a
foreign tourist against encashment certificate evidencing conversion of foreign currency into Taka,
photocopy of the encashment certificate produced by the outgoing tourist shall be retained at least for
five years along with the receipts/vouchers and other records of sale. lt may be mentioned here that
reconversion of Taka into foreign currency (maximum USD 500 or equivalent) can be done only by the
money changer with whom the foreign exchange was encashed earlier.

The Money Changers shall verify to satisfy themselves that the journey is to be undertaken not later
than two weeks after the date on which the exchange is issued. ln case of air travel the date of
departure needs to be determined on the basis of air ticket and an undertaking from the passenger
may be treated as the determining criterion for other cases. No exchange should be sold unless the
date of departure is specified within the stipulated time.

266 l':' ;.,t ;: ',,,,:

 Corporate Laws and Practices

7 Stock of foreign currency and foreign currency account

The initial stock of foreign currency notes and coins shall be built up by the Money Changers by way of
permissible purchases from incoming foreign/Bangladesh nationals in the manner prescribed at para 5
of this section above and sales in the manner prescribed at para 6 of this section. The maximum stock
of foreign exchange shall not exceed USD 25000 or equivalent as at the close of each business day.
Cash foreign exchange beyond this limit including entire TCs received from incoming passengers shall
either be encashed or deposited to the foreign currency account with the designated AD bank of the
concerned Money Changer. The balance of that account must not exceed USD 50,000 or equivalent at
any point of time.

8 Procurement of TC

Money Changers may procure saleable TC only by using the balance of its own foreign currency
account. Blank TC cannot be procured from any TC issuing authority by using other sources of foreign
exchange or by any cover fund in local currency.

9 Fixation/ display of buying/selling rate

The Money Changers shallfix their own exchange rates for purchase and sale of foreign currency notes
and coins and TC and the rates shall be displayed prominently at their counters.

i0 A. Submission of monthly statement

Details of all sales and purchases shall be recorded in the books properly and completely. All such
records and books of accounts of the licensee must be made available for inspection by Bangladesh
Bank officials as and when directed. Periodical returns/statements in prescribed form
[as perAppendix
5/2] shall be furnished to Foreign Exchange Operation Department, Bangladesh Bank, Head Office or
concerned Area Office of Bangladesh Bank on monthly basis within seven days from the end of each
month.

B. Online Money Changer Monitoring System

Bangladesh Bank has developed 'online Money Changer Monitoring System', a web based real time
transaction reporting platform. Each transaction of Money Changer with customers shall have to be
reported to the above mentioned system. Such reporting will generate an acknowledgement in pDF
format with unique transaction lD and Bangladesh Bank monogram for each transaction. The printed
copy of the acknowledgement report shall have to be delivered to the client. For details, Money
Changers shall follow the instructions mentioned in the user guide attached with the system.

I I Renewal of license

The license shall be valid for a period of one year; which may be suspended at any time without
showing any reason if, in the judgement of Bangladesh Bank, the Licensee has contravened any
instruction or regulation of Bangladesh Bank. The license may be revoked by Bangladesh Bank at any
time after giving the Money Changer a reasonable opportunity of explaining its position in the matter.
Bangladesh Bank may not consider prayer for renewal unless volume of transactions in the previous
year as per statements submitted to Bangladesh Bank exceeds the threshold amount fixed by

267 1t:'ag*
 Corporate Laws und Practtces

Bangladesh Bank from time to time. For renewal, the licensee shall apply to the General Manager,
Foreign Exchange Operation Department, Bangladesh Bank, Head Office, Dhaka (for Dhaka region) or
to the General Manager of concerned Area Office of Bangladesh Bank (for other areas) not later than
two months before the expiry of license. Application for renewal shall be accompanied by copies of
deed of house rent (in case of rented house) for the proposed renewal period, up-to-date tax payment
certificate, return of asset-liability (Form-lT1OB) submitted to lncome Tax Office, audited balance sheet
of the last year (where the applicant is a company). For non-submission of certificate evidencing
payment of tax for the preceding year, an undertaking for submitting the same later on along with
latest tax payment certificate should be furnished. The returns so submitted to tax authority must
accompany documents evidencing minimum net asset of the licensee of Tk. 10.00 lac for sole
proprietorship and partnership firms. For joint stock company, at the time of renewal, minimum paid
up capital shall be Tk.1O.OO lac or more as per audited balance sheet. Subject to satisfactory
performance in the previous year, licensee shall be advised by Bangladesh Bank in writing to deposit
non-refundable renewal fee in favor of Bangladesh Bank through account payee bank draft/pay order.
Certificate of renewal of license shall be provided through Authorized Dealer bank if license fee is
deposited accordingly. Money Changers must preserve the license and renewals issued by Bangladesh
Bank with reasonable care.

12 Change of Office

Any change in money changer's office location shall require prior approval of Bangladesh Bank'
Applications for changing office location should be forwarded to the General Manager, Foreign
Exchange Operation Department, Bangladesh Bank along with deed of rent (in case of rented house),
reasons for change etc.

l3 Conversion to limited company and transfer of ownership

Conversion of the status of a money changer from sole proprietorship or partnership to joint stock
company and transfer of ownership of a money changer may be done only with prior approval of the
Bangladesh Bank. Such requests may be accommodated by the Bangladesh Bank upon establishing the
bonafides of the cases. Money changers shall submit such requests to the General Manager, FEPD,
Bangladesh Bank, Head Office through their nominated ADs showing proper reasons.

268 1i]*g';
 Corporate Luws and Practices

CHAPTER 3
BANGLADESH BANK'S TRANSACTIONS WITH AdS

1. Buying and selling

Bangladesh Bank's purchases and sales from and to the ADs are in US Dollar only, on spot basis. All
such transactions with Bangladesh Bank are required to be in multiples of USS 10,OO0, subject to a
minimum of USS 50,000. ADs are free to quote their own rates, ready and forward, for transactions in
the interbank market and with their customers.
2. Payments through ACU

a) The central Banks of Bangladesh, lndia, lran, Nepal, Pakistan, Sri Lanka, Myanmar and Bhutan have
an Agreement to settle current transactions between these countries through the Asian Clearing
Union(ACU) mechanism. All such payments to the ACU member countries excepting those covered
by loan/credit agreements are accordingly settled through the Asian Clearing Union (ACU)
mechanism in "Asian Monetary Units which may be referred to in the abbreviated form as
"AMUs". The Asian Monetary Units shall be denominated as 'ACU Dollar' and 'ACU Euro' which
shall be equivalent in value to one US Dollar and one Euro respectively.

b) The ACU Agreement referred to above provides for settlement of the following types of payments

Payments from residents in the territory of one participating country to residents in the territory
of another participating country.
ii Payments for current international transactions as defined by the Articles of Agreement of the
lnternational Monetary Fund.
iii Payments permitted by the country in which the payer resides.

Besides, payments arising on account of import/export transactions on deferred payment terms

vuill also be considered as eligible payments for being settled under ACU mechanism. However,
payments not related to import and export of goods and services, except to the extent mutually
agreed between two or more participants will be considered as ineligible payments for being
settled under ACU mechanism.

The minimum threshold amount to be routed through ACU member central banks under ACU
arrangement has been set at 500 (Five hundred) Acu Dollar or ACU Euro.

Transactions considered as ineligible for being settled under ACU mechanism may be settled
bilaterally (as settlements take place other than under ACU mechanism) and shall be reported
under Statement S-1 (or other relevant statements as the case may be), Guidelines for Foreign
Exchange Transactions (Vol-2).

c) ADs shall maintain nostro accounts in AMUs (ACU Dollar, ACU Euro) with their correspondent
banks in ACU member countries for the purpose of settlements through ACU. Similarly accounts in
AMUs (ACU Dollar and ACU Euro) may be opened by the ADs in their books in the names of their
correspondents in ACU member countries. ADs may pay interest on the balance of nostro accounts
in AMUs as per mutually agreed terms and conditions with the correspondent(s).

d) An AD needing to fund its AMU nostro account with a correspondent bank in an ACU member
country shall do so through Bangladesh Bank against surrender of the required amount in AMU, or
of equivalent taka at Bangladesh Bank's selling rate.

269 tr ,: ",y
'.:
 Corporute Laws and Practices

Bangladesh Bank will advise the central bank of the concerned ACU member country to make the
amount available to the transferee bank in that country. After making the payment, the central
bank of the recipient ACU member country shall advise the Secretary General of the ACU
Secretariat to credit its account by debit to Bangladesh Bank's account.

e) For repatriating funds from an AMU nostro account with a correspondent bank in an ACU member
country an AD shall advise the correspondent bank to route the payment through the central bank
of that country, which will advise Bangladesh Bank to make the amount available to the recipient
AD. Bangladesh Bank on receipt of the advice, shall make the fund available to the recipient AD
(either in AMU or in equivalent Taka. at BB's buying rate, at the AD's option) and shall advise the
Secretary General of the ACU Secretariat to credit its account by debit to the account of the central
bank of the transferor ACU member country.

However, as the payment channel for processing 'ACU Euro' transactions has been suspended by
some correspondents, ADs are advised to refrain from operations in 'ACU Euro'temporarily until
further notice. Accordingly, all eligible current account transactions in 'ACU Euro' are permitted to
be settled outside the ACU mechanism until further notice.

3.Clearing arrangement with Bangladesh Bank

a) Bangladesh Bank operates a foreign currency clearing system enabling the AD banks to settle their
mutual claims in US Dollar, Pound Sterling, Euro and Japanese Yen arising from interbank
transactions; to economize the time and cost involved in settlements through correspondents
abroad. Under this arrangement, AD banks maintain clearing accounts with the BB in US Dollar,
Pound Sterling, Euro and Japanese Yen. Apart from the purpose of settlement with other ADs,
these accounts may also be used for transfers to and from correspondents abroad.

b) Settlement of the balances lying in each of the clearing accounts takes place at the end of each
month. Bangladesh Bank charges interest on the debit balance in an account on daily product basis
and debits the bank's account at the end of each working day and pays interest on the amount of
credit balance at the rates prescribed from time to time.

c) Payment against inland foreign currency LCs and inland back to back LCs in foreign currency as
mentioned in Para 35 & 40 respectively, Chapter 7 shall be settled through Bangladesh Bank FC

clearing accounts of the concerned AD banks.

d) Operation of the clearing system is centralized in the Forex Reserve and Treasury Management
Department of Bangladesh Bank, Head Office, Dhaka; but the ADs in other centers may transfer
funds to other banks through their Head /Principal Office in Dhaka.

2701P":g*
 Corporate Laws and Pructices

CHAPTER 4: SECTION-l

FOREIGN CURRENCY ACCOUNTS OF THE ADS AND PURC

1. Accounts in foreign currency

ADs may maintain accounts in freely convertible currencies with their correspondents/branches
abroad. However, maintaining relationship, opening of nostro accounts and transactions with
correspondents shall be subject to compliance with AML-CFT regulations of Bangladesh Bank/ other
competent authorities. Besides, a periodic statement regarding correspondent Banking shall have to
be submitted to FEPD, Head Office, Bangladesh Bank on half yearly basis in July and January of each
year (Appendix- 5/6) by Head Offices/Principal Offices of AD banks,

2. Foreign currency held by ADs at the disposal of the Bangladesh Bank

The foreign currencies held by ADs shall at all-time be deemed to be held at the disposal of the
Bangladesh Bank. The Bangladesh Bank, through its Foreign Exchange Policy Department, may give
such instructions with regard to the disposal of such currencies as it may deem necessary and
expedient.

3. Open position

Bangladesh Bank sets prudential limits on each AD bank's open (overbought/oversold) exchange
position. The AD should ensure that the prescribed open position limit is not exceeded, lf an AD
exceeds the prescribed limit and fails to furnish satisfactory explanation for the same, it may be
asked to sell the excess amount ready and to cover its position by buying forward for deliveries
corresponding to the maturities of its own forward obligations.

4. Overbought/ oversold position in excess of prescribed limits

The ADs are required to work out their open exchange position (overbought/oversold) daily as at the
close of the business on each working day and report to the Bangladesh Bank at the subsequent
working day (Chapter 2, Yol. 2). lf for reasons beyond control the overbought/oversold position
during the period under report is in excess of the prescribed limit, the daily statement must be
accompanied by a letter explaining the circumstances. A hard copy of the daily exchange position
statement prepared as per Appendices 49A & 498, GFET (Vol-2), duly signed by responsible officials
of the AD, shall have to be preserved for at least five years for eventual utilization/inspection by
Bangladesh Bank.

5. Purchase of one foreign currency against another

The ADs may enter into transactions for sale or purchase of foreign currencies both ready and
forward with other ADs, foreign correspondents and overseas branches provided that all such
transactions must be reported to the Bangladesh Bank in the appropriate Returns (See Chapter 2,
Vol. 2), daily exchange position statement (Para-4) and daily interbank transaction statement (Para-
12).
 Corporate Laws snd Pructices

6. Short term loans and overdrafts

The ADs may obtain short term loans and overdrafts for a period not exceeding 7 days at a time from
overseas branches and correspondents at the going market rates to meet their short term needs. lf
these loans or overdrafts require a collateral in Bangladesh or abroad prior approval must be
obtained from Bangladesh Bank. Short term loans and overdrafts taken under the authority of this
para may be remitted by the ADs without the prior approval of the Bangladesh Bank, but subject to
report.

7. Reconciliation of nostro account

ln pursuance of the 'Guidelines on Managing Core Risks in Banking' to be followed in case of foreign
exchange risks for reconciliation of nostro accounts, banks are required to submit a comprehensive
review of all nostro accounts containing a complete list of all un-reconciled entries at the end of each
quarter of the year; the list to be prepared by officials who have no involvement in the transaction
and approval process of the nostro accounts. Banks are also required to make provisions periodically
for debit entries remaining un-reconciled for more than three months as per schedule issued by
Bangladesh Bank from time to time. ln addition, June and December end reviews must be
accompanied with certification of the External Auditor of the bank concerned on correctness of the
status of the un-reconciled entries mentioned on the review.

Besides, banks are also required to submit a 'Statement of month- end position of un-reconciled
nostro account entries'containing summary of un-reconciled nostro account entries at the end of
each month. However, quarter-end and month-end statement will include a summary of un-
reconciled entries as per format given in Volume-2.

2721?,:::
 Corporate Laws and Pructices

SECTION-II
FORWARD DEALINGS IN FOREIGN EXCHANGE

8. General

ADs may engage in forward sales only against bonafide need of the customers/counterparty banks.
ln all cases the ADs must ensure that the cover is intended to neutralise the risks arising from such
transactions. AD banks are required to cover at least 50% of their forward sales by forward
purchases; the remaining portion may be covered by interbank forward purchases and/or spot
purchases of export bills. Forward sales associated with swap transactions are not required to be
covered by forward purchases. ADs may purchase forward from banks and non-bank customers like
exporters, foreign currency account holders (including retention quota accounts of exporters, foreign
currency accounts of EPZ companies), exchange houses abroad etc. Be it forward sale or purchase,
ADs must cover their own risk within the shortest possible time.

9. Forward sale and purchase

All forward contracts should be treated as firm and should be closed out on expiry. ln such cases, the
ADs should charge the difference between the contracted (booked) rate and the TT clean spot
buying or TT spot selling rate, as the case may be, ruling on the date the contract is closed out. The
forward contract should be closed without charging any difference if the rate moves in favor of the
customer on the date of the closure. ln other words, in case of a forward purchase by Authorized
Dealer no difference will be charged if the TT spot selling rate on the date of closure is at par or
lower (i.e., inferior from the point of view of the customer) than the booked rate. Similarly, no
difference should be charged for closing out a forward sale contract if the TT clean spot buying rate
on the date of closure is at par or higher (i.e., costlier than the booked rate from the point of view of
the customer) than the booked rate. No forward contract should be renewed at the old rate. All
cases of renewal should be treated as new contracts and the rates as applicable for purchase-sale of
forward contracts on the date of renewal should be applied.
10. Swap Transactions
The ADs may undertake swap transactions in line with their counterparty limit in accordance with
the core risk management guidelines issued by Bangladesh Bank to cover their risks arising from
forward transactions and manage cash flow mismatch arising out of day to day transactions.
However, they are advised to refrain from taking speculative positions through swap transactions.

11. Cross currency forward and swap

Cross currency swap and forward, not backed by underlying customers' transactions, can be
undertaken only if the 'Guidelines on Managing Core Risks in Banking' (as prescribed by Bangladesh
Bank vide BRPD Circular No. 17, dated 07 October, 2OO3) pertaining to Foreign Exchange Risk
Management are implemented to the satisfaction of Bangladesh Bank.
12. Keeping records and submission of statements
All documents (copy of l-Cs, contracts etc.) relating to forward contracts and swap transactions must
be preserved for subsequent inspection by Bangladesh Bank. Besides, ADs shall submit a daily
statement incorporating all the interbank transactions (See Chapter 2, Volume 2).
13. Two-way quotation
ADs are advised to quote both sale and purchase rate while quoting/asking for any spot/forward
transaction in the interbank market and with customers.
 Corporate Laws and Practices

SECTION- lll: HEDGING THE PRICE RISK OF COMMODITIES

14. Authorized dealers can hedge the price risk of commodities that are traded
on exchanges or over-
and OTC
the-counter (OTC) of their customers through standard exchange traded futures/options
derivatives on commodities subject to prior approval of Bangladesh Bank.
The use of commodity
genuine underlying commodity price risk
derivatives will only be permitted when customers have
exposure(s). This can be monitored by the ADs through checking of the
underlying risk exposure
instruments will not be
documents. Any kind of speculation through the use of commodity derivative
permissible.

ADs must completely hedge the commodity price risk arising from the commodity
hedge
standing or their
transactions by booking back to back transactions with banks having international
branches operating in Bangladesh.

While applying to Bangladesh Bank for commodity hedge transactions the suitability and
To become
appropriateness form (As per Appendix 5/3 and Appendix 5/4) must be submitted'
to monitor the credit
eligible for offering commodity derivative products, ADs must have the ability
price
and market risk arising from such products. They should also forward relevant commodity
should also be
forecasts to customers before the product is offered to the customers. The forecast(s)
forwarded to Bangladesh Bank along with the application'

ADs should follow IAS 39 (Financial lnstruments: Recognition and Measurement)

for accounting of
gain or loss on the commodity hedging instrument and the hedged item.

The following reporting requirements must be followed by the ADs:

- All the details of commodity hedge transactions that have been approved and booked with the
clients should be reported to Bangladesh Bank on a monthly basis.

- At maturity of each transaction, ADs must send a detailed report to Bangladesh Bank'

- Audited financial statements must have adequate disclosures of commodity hedge transactions'

prior to engaging in a transaction, ADs must advise client of all costs, charges and commissions
worst-case-
related to the commodity hedge. ADs must explicitly mention all the downside risks and
scenarios of a commodity derivative hedge to the client prior to entering into a transaction'

Relevant BRpD Circular No. 06, dated May 21, 2008 should be referred to for assigning risk

weightage for all the commodity transactions for capital adequacy.

274|tr}",tgt
 Corporate Luws and Practices

SECTION- IV: NON.RESIDENT TAKA ACCOUNTS OF FOREIGN BANK BRANCHES AND

CORRESPONDENTS

15. General

The Taka accounts of all foreign bank branches or correspondents outside Bangladesh are regarded
as non-resident accounts. The accounts of different branches of the same bank situated in different
countries must be identified separately and the accounts of each branch or group of branches in one
country should be designated as accounts of that country.

16. New non-resident accounts of banks

ADs may open or continue to maintain Non-Resident Taka Accounts in the names of their overseas
branches and correspondents against inward remittance in convertible currencies only. Transfer
between non-resident Taka accounts are permitted freely. Approved foreign currency may also be
soldto non-resident bank branches and correspondents provided the remittance is charged against
credit balances held in the non-resident Taka account. Non-resident Taka accounts may be opened
with initial deposits sent from abroad in a freely convertible currency. New non-resident Taka
accounts opened by the ADs must be reported to the Bangladesh Bank with details.

17. Reporting of permitted debits and credits

Payments from and receipts to the non-resident Taka accounts constitute purchases or inward
remittances and sales or outward remittances respectively of foreign currency. Consequently, all the
regulations and instructions applicable to inward and outward remittances shall apply mutatis
mutandis to payments, made to and from these accounts. All credits and debits and balances on
non- resident Taka accounts of foreign bank branches and correspondents will be reported in the
appropriate Returns (prescribed in Chapter 2,VoL.2).

)151'u,,t,.
-'" t' '";::: "'
 Corporate Laws and Practices

CHAPTER 5: SECTION- I

OUTWARD REMITTANCES

i. General

Barring a few remittances of special nature, most outward remittances either in its entirety or up to
a certain limit set by Bangladesh Bank may be approved by the ADs, following declaration of Taka as
convertible for current account payments from March, !994. However, the limits of release of
foreign exchange set forth in this Guidelines are indicative; all bonafide requests beyond these
indicative limits and paymenttransfer requests for a current internationaltransaction not specifically
included in this Guidelines will be accommodated by Bangladesh Bank upon establishing the
bonafides of the expenses.

ii. All remittances from Bangladesh to a foreign country or local currency credited to non-resident Taka
accounts of foreign banks or convertible Taka account constitute outward remittances of foreign
exchange. ADs must exercise utmost caution to ensure that foreign currencies remitted or released
by them are used only for the purposes for which they are released; they should also maintain
proper records for submission of returns to Bangladesh Bank as also for the latter's inspection from
time to time.

1. Reporting Forms

a) ln all cases of purchase of foreign currency, an application must be made to an AD. For payments
against imports into Bangladesh, the prescribed application form is form IMP (Appendix 5/11)
and for other types of remittances form TM (Appendix 5/5). TM form must be used for reporting
by the ADs even when remittance is approved by Bangladesh Bank in any other manner, for
instance by issuing a special permission/approval letter. On receipt of the application from the
client/customer, the ADs may affect the sale of foreign exchange if they are empowered to
approve the application. lf the transaction requires prior approval of the Bangladesh Bank, the
application should be forwarded by the AD to the Bangladesh Bank for consideration.

b) Outward remittances for imports are to be reported to the 'Online lmport Monitoring System' of
Bangladesh Bank. Outward remittances (other than for import of goods) are to be reported to
the 'Online TM Monitoring System' of Bangladesh Bank. Here ADs are advised to mention "TM lD
number (unique number generated from the online system of Bangladesh Bank after posting)" at
the upper left corner of hard copy of form TM.

2. Applications for Bangladesh Bank's prior approval for outward remittances, wherever required,
should be submitted to the Bangladesh Bank only through the ADs and not by their customers
directly; all such applications should be forwarded by the ADs to Bangladesh Bank by their own
messengers or by post. While applying to Bangladesh Bank for releasing foreign exchange on behalf
of customers, AD should submit necessary papers/documents duly attested by the Authorized official
of the AD along with their recommendations/comments.

3. Dealing with approved applications

ln respect of the special permissions/approvals from Bangladesh Bank, the ADs should see that these
have been approved by duly Authorized officers and that they bear the Bangladesh Bank's embossing

276l? ,t E.,::
 Corporate Laws and Practices

seal. ln case the authorization is signed by an official of Bangladesh Bank whose specimen signature
is not available with them, authentication of the authorization should be made from the nearest
office of the Bangladesh Bank. lt is important that once the permissions have been accorded by
Bangladesh Bank, the ADs carry out the transactions only on behalf of the original applicants for
whom the permissions have been given.

4. Permission for recurring remittances

The amount released must not exceed the Authorized limit. Also, the instructions, if any, given in the
approval with regard to the amounts to be released periodically e.g. monthly or quarterly must be
strictly adhered to.

5. Period of validity of Bangladesh Bank's approval

All authorizations for selling foreign exchange for outward remittances given by the Bangladesh Bank
remain valid for a period not exceeding 30 days from the date of approval unless they are expressly
stated as valid for a specified longer period or unless they have been revalidated for a further period.
The ADs should not affect any remittance against approval of Bangladesh Bank which have lapsed.

6. Disposal of application forms

Original copies of all IMP forms, TM forms covering remittances effected by the ADs must be
submitted to the Bangladesh Bank along with the appropriate Returns as laid down in Chapter 2,Yol.
2. For the disposal of the remaining copies of the IMP forms, please see Para 31-(b), Chapter 7.

7. Cancellation of remittances

ln the event of any remittance which has already been reported to the Bangladesh Bank on the
prescribed return being subsequently cancelled either in full or in part, the ADs must report the
cancellation of the outward remittance as an inward remittance in Form C ( as applicable, Para- 10).
The return in which the reversal of the transaction is reported should be supported by a letter giving
the following particulars:
o The date of the return in which the outward remittance was reported.
o The name and address of the applicant.
o The amount of the sale effected originally.

o The amount cancelled and

o Reasons for cancellation.
 Corporate Laws and Practices

SECTION- !l: INWARD REMITTANCES

8. General

The term "lnward Remittances" includes not only remittance by T.T., M.T., Drafts etc., but also
purchases of bills, purchases of drafts under Travelers' Letters of Credit and purchases of Travelers'
Cheques. This Chapter does not, however, cover purchases of foreign currency notes and coins which
are dealt with in Section - lll.

9. lnward remittances-no restrictions

a) The ADs may freely purchase foreign currencies or raise debits to non-resident Taka Accounts of
the respective bank branches and correspondents. Remittances equivalent to USS 2000 and
above should be reported on Form C (See Appendix 5/6) attached to the appropriate schedule
(See Chapter 2,Yol.2). However, declaration on Form C by the beneficiary is not required against
remittances sent by Bangladesh nationals working abroad. The purpose of remittances should be
clearly stated on the Form C. Where the country of origin of funds and currency in which
remittances received are the same, the ADs may submit a consolidated Form C in respect of
those remittances attaching therewith a separate list showing details of remittances comprising
the amount reported on Form C. Remittances received against exports should be certified and
reported on EXP Forms. ln case of remittances, received in advance for exports the ADs should
obtain a signed declaration from the beneficiary on the back of the "Advance Receipt Voucher"
(See Chapter 2, Vol. 2) certifying the purpose of remittance.

lnward remittance up to USD 10,000 (Ten thousand) or equivalent against service exports may
be credited in the respective accounts of service exporters without obtaining declaration on
Form C. ln this context AD shall satisfy themselves bonafide of the transactions with the notation
of the relevant SWIFT message. ln case of non-availability of required information, AD shall
contact the beneficiaries through e-mail about the purpose of transactions.
b) lnward remittances against export of goods are to be reported to the 'Online Export Monitoring
System' of Bangladesh Bank. lnward remittances other than for export of visible goods against
EXP Forms are to be reported to the 'Online lnward Remittance Monitoring System' of
Bangladesh Bank. Here ADs are advised to mention "lnward lD number (unique number
generated from the online system of Bangladesh Bank after posting)" at the bottom left corner
of 'Form-C' (in the cases where Form-C is used).
10. Reimbursement in foreign currency for Taka bills and drafts
There is no objection to the ADs obtaining reimbursement from non-resident banks in freely
convertible foreign currency in respect of Taka bills and drafts purchased by them under instructions
from such a non-resident bank whether under Letters of Credit or under other arrangements.
11. Cancellation of inward remittances
lf an inward remittance already reported to the Bangladesh Bank is cancelled, either in full or in part,
because of non-availability of beneficiary or for any other reason, the ADs must report the
cancellation of the inward remittance as an outward remittance on TM form.
ln reporting such transactions to the 'Online TM Monitoring System' lnward lD Number (as
mentioned Para 10) of the concerned inward remittance shall have to be mentioned against the
in
head 'lnward Reference; of the above mentioned system. Besides, lnward lD Number shall have to
be mentioned at the upper right side of the hard copy of the form TM. ADs shall preserve the
documents in support of such cancellation.

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SECTION - lll: DEALING lN FOREIGN CURRENCY NOTES AND COTNS ETC.

12. Unauthorized Dealings

No person, firm or company other than an AD or Authorized Money Changer is permitted to deal in
foreign currency in any form. Other persons entering into transactions involving the buying or
otherwise acquiring or borrowing from or selling or otherwise transferring or lending to or
exchanging with, a person who is not an AD or Authorized Money Changer any foreign currency, will,
therefore, be deemed to be contravening the provisions of the FER Act. 1947.

13. Conditions under which Ads /Authorized Money Changers may purchase foreign currency

ADs and money changers may freely buy foreign currency from incoming passengers regardless of
nationality and regardless of whether or not a declaration on form FMJ (Appendix5/7) is produced at
the time of encashment. lf this form is produced, the amount encashed should be endorsed on it.

The ADs may also purchase foreign currency notes, coins and other travel instruments freely from
Authorized Money Changers without the production of Form FMJ.

14. Disposal of foreign currency notes and coins by the ADs

a) The ADs are permitted to dispose of foreign currency notes etc. by way of sales to other ADs and
the general public in accordance with the instructions of the Bangladesh Bank.

b) They may also export foreign currency notes and coins to agents or correspondents abroad for
credit to their Foreign Currency Accounts with the prior approval of the Bangladesh Bank and
Office of the Chief Controller of lmports & Exports. Applications in duplicate with copy of duly
attested agreement should be made to Foreign Exchange Operation Department, Bangladesh
Bank, Head Office; approval will be given in the duplicate copy. For reasons of security, strict
confidentiality should be maintained in respect of communication with Bangladesh Bank; this
may preferably be done through personal calls on the senior officials of the department.

15. The ADs' requirements of foreign currency notes

ln addition to normal purchases from the public, Authorized money changers and other Authorized
dealers, an AD may supplement their holdings of foreign currency notes from abroad with approval
from the Bangladesh Bank.

16. Responsibility for the realization of the value of foreign currency notes purchased by Ads

All purchases of foreign currency notes and coins made by the ADs and Authorized Money Changers
are entirely on their own responsibility and they must make their own arrangements for realizing the
proceeds of surplus foreign currency notes and coins purchased by them which cannot be sold to
their customers as permitted under the Regulations. The ADs may realize the value of surplus foreign
currency notes and coins by repatriating them through their foreign branches or correspondents and
having the proceeds credited to their appropriate Foreign currency Accounts.

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 Corporate Laws and Practices

17. Release offoreign exchange in the form of USD notes to outgoing persons

The following instructions shall be applicable for releasing foreign exchange in the form of foreign
currency notes against different entitlements or balances held in different foreign currency accounts
as stated in different chapters of this Guidelines:

A. Foreign exchange in the form of USD notes & coins not exceeding 5000 (five thousand) May 29,
2018be issued in favor of outgoing Bangladesh nationals against their respective entitlements
such as private travel quota/business travel quota/travel for treatment abroad/study abroad etc.
or any other general or special permission per person per trip; the remainder amount of
entitlement or the entire entitlement may be released in the form of notes/coins of other freely
convertible foreign currencies. To mention, the entitlements may be utilized also through
international cards (credit/debit/pre-paid as applicable) as mentioned in the different Paras of
Chapter 19.

B. The limit mentioned in 'A' shall also be applicable to outgoing Bangladesh/foreign nationals for
issuing USD notes/coins against balances held in their respective foreign currency accounts
(Private Foreign Currency Accounts, Resident Foreign Currency Deposit Accounts, Exporters'
Retention Quota Accounts etc.) or from the balances of Convertible Taka accounts (or against
equal amount of foreign exchange under back to back basis) per person per trip; the remainder
amount or the entire amount may be released in the form of notes/coins of other freely
convertible foreign currencies from the balances of the respective foreign currency accounts in a
trip. Other relevant regulations regarding issuance of foreign exchange against each entitlement
shall have to be followed meticulously as stated in different chapters of this Guidelines.

280 1i]*g*
 Corporate Luws qnd Practices

CHAPTER 6: IMPORT AND EXPORT OF CURRENCY NOTES AND COINS, FOREIGN EXCHANGE, GOLD,
SILVER, JEWELLERY AND SECURITIES ETC.

A. lmport of foreign currency notes and coins

ln terms of Bangladesh Bank Notification Nos FE-1/03-BB dated 6th January,2OO3 and FE-1/04-BB
dated 23rd March, 2004 any person may bring into Bangladesh from any place outside Bangladesh
without any limit foreign currency notes or bank notes other than-

t. Un-issued notes and coins.

ii Notes legaltender in Bangladesh in excess of Taka 500 in value.

Provided that the concerned person makes a written declaration to the Customs Authorities at the
time of arrival, in FMJ Form (See Appendix 5/7) of the entire amoun! no declaration will however, be
necessary if the amount brought in does not exceed USS 5000 or its equivalent in foreign currency
and does not exceed Taka 500 in notes legal tender in Bangladesh.

B. Sending into Bangladesh by post/courier or otherwise of any currency note, bank note or coin by any
person from abroad without general or specific permission from the Bangladesh Bank is prohibited.

C. Any traveler entering into Bangladesh may bring with him at every time Bangladesh currency
notes/coins within the limit as prescribed hereunder:

Members of the crew of a ship or an aircraft or the staff of a railway may bring Bangladesh
currency notes up to Tk. 500 at any one time.

ii An incoming/outgoing passenger may bring in/take out up to Taka 500 (five hundred) in
Bangladesh currency at the time of arrival into/departure from Bangladesh.

iii. Every foreign national travelling on a foreign passport and persons travelling on Bangladesh
passports will, while entering into Bangladesh by sea, air or land from any destination outside
Bangladesh declares to the Customs authorities, on FMJ Form to be completed in a single copy
all currencies if the amounts brought in exceed the limits mentioned at para 1 (A) above. Transit
passengers, however, are not required to complete this form. The customs official will return to
the declarant the form duly authenticated. Authorized Money Changers and ADs need not ask
for this form at the time of encashing the foreign currency and foreign currency instruments to
Taka. Foreign nationals should however retain these declarations with themselves so as not to
face difficulty in taking out unspent foreign exchange at the time of their departure from
Bangladesh.

D. Bank booths operating in airports under license with limited scope from Bangladesh Bank may take
deposits from NRBs in foreign currency brought in by them for crediting their foreign currency
accounts or Non-resident Taka accounts (by converting foreign currency at prevailing exchange rate)
maintained with concerned AD bank branches. In case the foreign currency brought in by NRBs
differs from account type (i.e., USD A/C, GBP A/C, etc.) of the account holders, bank booths shall
convert the currency into relevant foreign currency at appropriate cross currency exchange rate to
effect the deposits.

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 Corporate Laws and Practices

An incoming person may retain foreign exchange up to USS 5000 or equivalent brought in by
himself/herself without declaration and take out the same at the time of departure from Bangladesh
without endorsement in passport and air ticket. Such amounts may also be deposited in RFCD
account by a resident Bangladeshi and in NFCD account/private non-resident FC account by a non-
resident Bangladeshi any time after arrival in Bangladesh.

Amount in excess of USD 5000, brought in by the resident Bangladeshis, should however be
encashed or deposited in appropriate foreign currency account within 30 days of arrival. Such
amounts brought in by non-resident Bangladeshis can be encashed or deposited in foreign currency
account any time after return to Bangladesh. For a foreign national, the entire amount brought in
with declaration on Form FMJ or up to USD 5000 brought in without declaration may be taken out
freely at the time of departure. Such amounts brought in by foreign nationals can be encashed or
deposited in foreign currency account any time after their entry into Bangladesh.

1. lmport of gold and silver

ln terms of Notification No. 1(2) ECS/48 dated 1st July, L948 issued pursuant to sub-section (1) of
Section 8 of the FER Act, 1947 Government have prohibited, except with the general or special
permission of the Bangladesh Bank, the import into Bangladesh from any place outside Bangladesh
of:

a) any gold coin, gold bullion, gold sheet or gold ingot whether refined or not, and

b) any silver bullion, silver sheet or plate which has undergone no process of manufacture
subsequent to rolling or any incurrent silver coin.

lmport of gold and silver into Bangladesh from any place outside is, therefore, subject to the
Bangladesh Bank's general or specific authorization. General permission has been accorded by
Bangladesh Bank allowing an incoming Bangladesh national to bring in up to 2(two) kilograms of gold
or silver in ingot /bullion form at the time of arrival into Bangladesh, subject to payment of duties
and taxes as levied by the Govt.

2. Definitions of gold and silver

Gold, as defined under Section 2 of the FER Act, includes gold in the form of coin whether legal
tender or not or in the form of bullion or ingot whether refined or not. Silver, as defined under the
same Section of the Act includes silver bullion or ingot, silver sheets and plates which have
undergone no process of manufacture subsequent to rolling and incurrent silver coin which is not
legal tender in Bangladesh or elsewhere.

3. lmport of jewellery and precious stones

There are no restrictions under the FER Act on the import of jewellery and precious stones. lmport of
jewellery and precious stones is, however, subject to the lmport Trade Control Regulations.

4. Definitions of jewellery and precious stones

The terms jewellery and precious stone are deemed to include all articles made wholly or mainly of
gold, platinum, diamonds of all kinds, precious or semi-precious stones, pearls, whether or not

282lY x y. t:
 Corporate Laws and Practices

mounted, set or strung and articles set or mounted with diamonds, precious or semi-precious stones
or pearls.

5. lmport of Securities

There are no restrictions under the FER Act on import of securities into Bangladesh

5. Export of foreign exchange

Any person may take out of Bangladesh with him foreign exchange issued to him by an AD and
endorsed on his passport.

ii. General permission has been granted

a) to the ADs to send out of Bangladesh cheques, drafts or bills of exchange which have been
acquired by them in their normal course of business and within the terms of their
authorization; and

b) to a foreign national who is resident in Bangladesh, but is not domiciled in Bangladesh to

take or send out of Bangladesh drafts or cheques drawn on their foreign currency accounts.

7. The term foreign exchange as defined under Section 2 of the FER Act, includes cheques, drafts,
travelers'cheques, letters of credit, bills of exchange and promissory notes expressed or drawn
in foreign currency, or in Bangladesh currency but payable in foreign currency.

8. (a)

(i) Any person may take out of Bangladesh, Bangladeshi legal tender notes and coins not
exceeding Taka 500 only in value at any one time.

ii. Currency which has been brought into Bangladesh in the safes of vessels or aircraft or which
has been taken on board vessel or aircraft with the permission of the Bangladesh Bank may
be taken out of Bangladesh.

iii. Any person ordinarily resident in Bangladesh may take out foreign exchange not exceeding
USS 5000 or its equivalent which was brought in without declaration at the time of returning
from abroad.

iv. Any person not ordinarily resident in Bangladesh including Bangladesh Nationals working
abroad may take out of Bangladesh any amount in foreign exchange not exceeding the
amount declared by him to the Customs Authority on arrival in Bangladesh. However, such a
person may take out at the time of leaving Bangladesh foreign exchange not exceeding US S
5,000 or its equivalent brought in without declaration to the Customs Authority on his arrival
in Bangladesh.

(b) lt is not permissible to send currency notes and coins out of Bangladesh by post/courier or
any other means.

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 Corporate Laws and Pructices

9. Export of Securities

Under Section 13(lXa) of the FER Act, it is not permissible for any person to take or send out any
security to any place outside Bangladesh except with permission of the Bangladesh Bank. Residents in
Bangladesh who are holders of foreign securities and who wish to send these securities to bank,
brokers or agents abroad for purposes of sale, transfer etc., should apply to the Bangladesh Bank
through an AD for the necessary export permit. Permission for transfer of foreign securities will be
granted provided the AD gives an undertaking that the securities will be received back in Bangladesh
within a specified period or in the case of sale, the foreign currency proceeds will be remitted to
Bangladesh.

10. Taking out and bringing in jewellery by outgoing and incoming passengers

Sub-section 2 of Section 8 of the FER Act prohibits export from Bangladesh of jewellery or precious
stones except with the general or special permission of the Bangladesh Bank. Bangladesh Bank,
however has accorded general permission to all outgoing and incoming adult female passengers to
take out of Bangladesh and to bring into Bangladesh any quantity of personal jewellery worn on their
persons or as part of their personal baggage.

11. Jewellery Export Scheme

Export of gold jewellery and silver jewellery from Bangladesh may be effected by exporters
registered with the office of the CCI&E as per normal EXP procedure (described in Chapter 8). Back to
back import LCs may be established by ADs for import of gold, silver and precious stones for
manufacture and export of jewellery against export LCs received by registered jewellery exporters
operating under the bonded warehouse system, subject to observance of the minimum domestic
value addition requirement prescribed in the Jewellery Export Policy formulated by the Ministry of
Commerce (10% for gold jewellery, 1.5%o for stone- studded gold jewellery and 25% for silver
jewellery). Back to back imports may also be effected against firm export orders in cases where
import costs are met out of advances received by the exporter from the foreign buyer, or where the
import payment is settled abroad directly by the foreign buyer.

lf the cost of imported inputs are prepaid abroad by the foreign buyer or met out of advances
received from the foreign buyer, exporters shall be required to repatriate export proceeds to the
extent of the local value addition only. ln such cases, the total export value and the cost of imported
inputs should be shown separately in the EXP Form, and the ADs while forwarding the triplicate copy
of the EXP Form shall enclose papers /documents in evidence of prepaid input import/ advance
receipt of import costs.

prior permission of Bangladesh Bank will be required for export of Jewellery on consignment basis or
for sale in exhibitions abroad.

284 l11rgr:
 Corporate Laws and Practices

CHAPTER 7: SECTION -1

IMPORTS

a) !mport trade control

lmport of goods into Bangladesh is regulated by the Ministry of Commerce in terms of the lmport
and Export (Control)Act, 1950, through lmport Policy Order (lPO) in force and Public Notices issued
from time to time by the Office of the Chief Controller of lmports and Exports (CC|&E). The
instructions contained in this chapter apply to sales of foreign exchange or transfers to non- resident
taka accounts against import of goods into Bangladesh.

b) Registration of importers

ln terms of the lmporters, Exporters and lndentors (Registration) Order, 1981 no person can import
goods into Bangladesh unless he is registered with the CCI&E or exempted from the provisions of the
said Order. Before Letter of Credit Authorization Form (LCAF) is issued or Letter of credit (LC) is
opened or remittance is made for imports into Bangladesh the AD should verify that the importer is
registered with the CCI&E or otherwise exempted from such registration. The AD should ensure that
the registration number of the importer is invariably furnished on the IMP form. Where the importer
is exempted from such registration, a suitable mention of this fact should be made on the IMP form.

c) Online reporting

ln addition to other reporting requirements to Bangladesh Bank, ADs shall report all types of
permissible import transactionsto the'Online lmport Monitoring System'of Bangladesh Bank on
daily/regular basis.

1. Dealing with known customer

The ADs must ensure that they deal only with known customers having a place of business in
Bangladesh and can be traced easily should any occasion arise for this purpose. Opening of LCs and
payments for imports into Bangladesh should be made through an AD in the area where the holder
of the LCAF is resident (Appendix-4 lists the areas for foreign exchange regulation purposes). ln case
the importer is a new customer, the AD should obtain certificate from the AD through which the
applicant imported earlier to the effect that no bill of entry is due/overdue for submission by the
importer.

2. Terms of imports

Appropriate lncoterms should be incorporated in the letter of credit/purchase contract in

compliance with the IPO in force. lmport shall usually be made on CFR / CPT basis (as the case may
be). However, import on FOB basis shall be subject to the provisions mentioned in para 13 of this
chapter.

3. lmports under special arrangements

Specific procedural instructions regarding imports under special arrangements or agreements
(grants, loans, barters etc.) issued by the Bangladesh Bank from time to time should be followed by
the ADs.

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 Corporate Laws and Practices

4. Use of correct HS Code

It is mandatory to use correct HS Code to indicate the classification of goods to be imported as per
First Schedule of the Customs Act, 1969. No bank shall issue LCAF or open LC without quoting correct
HS Code in the LCAF and LC or purchase contract ( as the case may be). Failure to do so may lead to
imposition of penalties by the Customs Authorities. ln all cases of doubt, reference should be made
either by the AD or the customer direct to the concerned customs authority.

5. LC Authorization Form

a) The ADs are Authorized to issue 'Letter of Credit Authorization Forms' (LCAFs) in conformity with
the IPO allowing imports into Bangladesh. lmport permits or clearance permits are not required
for imports by the Ministries and Government Departments against specific allocation given to
them by the government. But all Ministries and Government Departments except the Ministry of
Defense shall duly submit LCAF to their nominated banks before opening LC for the purpose of
import. The LCAFs, available with the ADs, are issued in sets of 5 copies each. Of these, the one
marked "For Exchange Monitoring Purpose" should be used for opening LC and for effecting
remittances. The ADs should be very careful about compliance with the instructions of the IPO
and relevant Public Notices in the matters of issuance and disposal of LCAFs.

b) (i) The ADs will not issue blank LCAFs to their clients. The importer should himself/herself sign
the LCAF in the presence of an officer of the AD, an Authorized official of the AD should put
his/her signature with date and seal on the LCAF, evidencing verification of the importer's
signature and import entitlement as per current lPO.

(ii) ln no case the ADs will accept authenticated LCAF for opening LC direct from the parties.
Normally the AD issuing and authenticating an LCAF would also open the LC but if it requires
transfer to another AD this should be done directly by the transferring AD itself. The AD receiving
the LCAF must conduct its own verification of the signatures on the LCAF before opening LC.

c) LCAFs remain valid for remittances for one year subsequent to the month of issuance. For
example, if an LCAF is issued on 15th January, 1992 remittances can be made there against up to
3Lst January, 1"993. However, LCAFs issued for import of capital machineries and spares will
remain valid for remittances for 18 months subsequent to the month of issuance. The ADs
should not, under any circumstance, make remittance against any LCAF after the expiry of the
above prescribed validity periods without first obtaining revalidation of the LCAF. They may,
however, allow such remittances without obtaining revalidation only against foreign currency
funds of Bangladesh nationals working abroad.

ADs should not, under any circumstance, make remittance against any LCAF after the expiry of
the above prescribed validity periods without first obtaining revalidation of the LCAF. However,
approval of Bangladesh Bank will not be required for extending validity of LCAF related to import
of capital machinery under long term supplier's/buyer's credit upon approval of BIDA; the
approval of BIDA in this regard will suffice. Revalidation of LCAF will not be required for
remittances against import out of fund held in foreign currency accounts of importers
maintained under general or special authorization from Bangladesh Bank.

286 lP*gr:
 Corporate Luws and Practices

5. Endorsement on LCAF

When LCs are opened, full particulars thereof must be endorsed on the back of the exchange
monitoring copy of the LCAF under the seal and signature of the AD. The Taka equivalent of the LC
opened must be endorsed on the LCAF at the ruling BC selling rate (spot), but if a forward exchange
cover is provided the conversion should be made at the actual forward rate. Foreign exchange must
not be sold ready if a forward sale is outstanding against an LC.

Details of amounts remitted, whether under LC or otherwise, should be endorsed on the back of the
exchange monitoring copy of the LCAF together with the number of the relative IMP form.
Appropriate reference to the LCs, the dates on which these were opened and remittances effected
should be noted on the back of the LCAF in order to identify the endorsement against any particular
LC opened or remittances effected.

Before delivering the import documents to the importers, the AD should invariably endorse on the
invoices accompanying the bills the amount both in figures and words that they have remitted from
Bangladesh. The endorsement should be under the seal and signature of the ADs. ln case of payment
on deferred/usance basis, the amount for which the bill has been accepted should be endorsed in
the invoices.

7. Cancellation of LCAF

On expiry of an LC unutilized partly or wholly, or on cancellation or reversal of sale of foreign

exchange, the endorsements made on the back of the LCAF may be cancelled with appropriate
remarks, under the seal and signature of the AD.

8. Endorsement made mistakenly

ln case an endorsement is made mistakenly on a wrong LCAF, the AD may cancel the endorsement
provided the endorsement is transferred simultaneously to the appropriate valid LCAF. Endorsement
may be transferred only from one valid LCAF to another valid LCAF where both are identical in all
respects.

9. Amounts for which LC may be opened and remittances made under LCAF

The aggregate amount of foreign exchange sold against an LCAF whether under LC or otherwise,
should not exceed the value mentioned in the LCAF, ln case where LC was opened and remittance is
needed in a floating currency against which no forward booking has been made, the Taka value of
the LCAF shall be deemed to have been increased to the extent of appreciation of the foreign
currency for the purpose of allowing remittance by the AD.

10. Remittance in excess of the value of the LCAF

Remittance in excess of the value of the LCAF is not permissible without prior approval of the
Bangladesh Bank except for payment of normal bank charges of the foreign correspondents. ln other
words, the ADs need not adjust the amount of bank charges from the LCAF value. Remittances of
bank charges should be reported to the Bangladesh Bank as usual with TM forms and necessary
supporting documents. The ADs shall endorse the amount of bank charges remitted along with the
date of remittance on the back of the exchange monitoring copy of the LCAF. They should also quote

287 | i:3 ;.r g *

 Corporate Laws and Practices

the approval number and date, if remittance is effected against any specific approval from the
Bangladesh Bank.

Bank charges of unusual nature i.e., not commonly attributable to transactions against LCs cannot be
remitted without Bangladesh Bank's approval. Foreign bank charges in respect of imports in the
public sector shall be on the suppliers account and, hence, cannot be remitted from Bangladesh.
Bank charges under barter/special trade arrangements (STA) shall be payable in accordance with the
relevant provisions therein.

11. LCAF issued in the name of a person/firm other than applicant

An AD may not open LC or make remittances of foreign exchange covering imports into Bangladesh
in cases where the exchange monitoring copy of the relevant LCAF has been issued in the name of a
person or firm other than that of the applicant. Such requests received by an AD should be referred
to the area office of the CCI&E.

12. Remittance of proceeds of dishonored bills

An AD should not remit the proceeds of bills in cases where the name of the importer on the bill of
exchange differs from that on the LCAF. As an exception, where goods are imported under
documentary collection (DP or DA) basis or even under LC and the original drawee dishonors the bill
and the foreign shipper or his local agent finds another buyer for the goods, the AD may make the
remittance without prior permission of the Bangladesh Bank provided he certifies that the applicant
remitter is the buyer of the goods and provided the remitter is in possession of a valid LCAF covering
the import of the goods in question.

13. Disposal of fully utilized or unutilized LCAF

Exchange monitoring copies of the LCAFs submitted by the importers should, when fully utilized, be
forwarded by the ADs to the Bangladesh Bank. Exchange monitoring copies of LCAFs, which remain
unutilized for the full amount, should also be surrendered by the ADs to the Bangladesh Bank after
expiry of the validity period for remittance. Other copies of LCAF are to be disposed of as per
instructions laid down in the IPO in force.

14. Remittance against goods imported under penalty

An AD may not make remittance in payment of goods if the exchange monitoring copy of a valid
LCAF is not produced even though the goods may have been cleared by the Customs. Goods
imported in an unauthorized manner are liable to be confiscated by the Government. All applications
for remittances of foreign exchange covering such imports should be submitted to the Bangladesh
Bank for prior approval and should be accompanied by the attested copy of the Customs Bill of Entry
for consumption in Bangladesh, the relative penalty order together with full particulars of the
circumstances under which the goods were imported without the requisite LCAF.

15. lmports on FOB basis

ln case of import on FOB basis, full LCAF value is not remittable. ln other words, freight charges
payable on imports on FOB basis are to be adjusted against the relative LCAF value. ln case of FOB
imports the AD should endorse, beside FOB value, the freight payable in Taka as indicated in the bill

288 lli)l,rr*
 Corporate Laws and Practices

of lading etc. ln cases where miscellaneous charges i.e. handling charges, cartage/surface
transportation, documentation charges etc., are required to be paid by the importers on arrival of
goods through the Airlines, the ADs shall also endorse on the exchange monitoring Copy of the LCAFs
the amount of such charges as indicated in the airway bill along with the freight in Bangladesh Taka.
The ADs should also give a certificate to the importers in the form given in Appendix 5/8 to the effect
that the amount of freight, handling charges etc. have been endorsed on the relative LCAF. The issue
of this certificate is essential as the shipping companies etc. are under instructions not to accept
payment of freight in Taka unless the above mentioned certificate is produced to them. ln cases
where the FOB value and the amount of freight payable in Taka exceeds the value of the LCAF the
application should be referred to the Bangladesh Bank for consideration with full particulars and
supporting documentary evidence.

16. lmport against LCAF without opening LC

Selected items as mentioned in the IPO in force may be imported against registered LCAFs without
opening LC. ln such cases, the ADs shall stamp 'lmport without LC' on the upper right corner of the
LCAFs. LCAFs so stamped and form (as per appendix-5/14) duly filled in must be registered by the
issuing bank itself. ADs shall ensure that the import does not exceed prescribed limit for import
without LCs as mentioned in the lPO. ln all such cases contract information shall be reported to the
'Online lmport Monitoring System'.

289 1)].:LE*
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SECTION -!l: TETTERS OF CREDIT AND REMITTANCES AGAINST IMPORTS

17. General

ADs may not issue, advise, notify or confirm any LC, authority to purchase, guarantee or similar
undertaking covering imports into Bangladesh the implementation of which would involve a
payment in Taka to a nonresident account or a payment in foreign currency except in accordance
with the instructions prescribed hereunder,

LC covering imports: The AD should establish LCs against specific authorization only on behalf of their
own customers who maintain accounts with them and are known to be participating in the trade.
Payments in retirement of the bills drawn under LCs must be received by the ADs by debit to the
account of the concerned customer or by means of a crossed cheque drawn on the drawee's other
bank. These restrictions shall not apply to import of articles for the private use of the importer as
permitted in the lmport Policy Order.

18. Terms on which LCs may be opened

(i) Documentary Credits: All LCs and similar undertakings covering imports into Bangladesh must be
documentary LCs and should provide for payment to be made against full sets of onboard
(shipped) bills of lading, air way bills, railway receipts, truck receipts, post/courier parcel receipts
showing dispatch of goods covered by the credit to a destination in Bangladesh. All LCs/similar
arrangements must specify submission of signed invoices and certificates of origin. lf any
particular LCAF requires submission of any other document or the remittance of exchange at
certain periodical intervals or in any other manner, the LC/similar arrangement should
incorporate those instructions of the LCAF.

(ii) LCs requiring prior permission: lt is not permissible to open clean or revolving LC or LC with
realization clause (except EPZ/EZ companies). Applications for opening such LCs should be
referred to Bangladesh Bank with full particulars.

(iii) Transferable LC: The ADs may open transferable LCs for imports into Bangladesh under cash LCAF
without reference to Bangladesh Bank. They may also allow without reference to Bangladesh
Bank amendments that do not violate foreign exchange regulations and IPO in force.

(iv) Opening of LC for imports from countries banned by the competent authority: lt is not
permissible to open import LCs in favor of beneficiaries in countries from which imports into
Bangladesh are banned by the competent authority.

19. Verification of import price etc.: Before opening of LC or issuing LCAF, the AD shall have to take usual
and reasonable cautionary measures to ensure that both the exporter and importer are bonafide
businessperson of the goods concerned, the exporting country is the usual exporter of the goods
concerned and the price of the goods concerned is competitive in terms of prevailing price in the
international market on the date of contract and/or similar imports in contemporary period. ADs are
advised to verify the above, if needed, with the help of concerned Bangladesh Mission abroad.

20. lmport through land ports: Following instructions are to be followed by ADs while importing through
land ports: (a) only one port of entry (land port) is to be mentioned specifically in the LC/purchase
contract (as the case may be);

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(b) ADs shall have to send copies of LC and subsequent amendments(s) if any, including other
relevant information to the land port authority; (c) specimen signatures of the officials working
in the import-export desks of the concerned AD bank, contact phone and fax nos. of the ADs are
to be sent to all the land ports;

(d) ADs through their agents or representatives shall collect certified invoices and bill of entries
evidencing entry of goods into Bangladesh from the concerned land ports;

(e) LCs/purchase contracts shall contain inter alia the following payment terms instead of
reimbursement authority/debit authority:

"Upon receipt of documents complying with credit terms, we shall effect payment as per instructions
of Negotiating Bank/Collecting Bank";

(f) LC covering value more than USD 5000(USD 10,000 in case of coal import) or equivalent should
be sent through SWIFT or other similar arrangements to the advising bank; (e) NOC (if any) shall
contain name of the officials along with P.A. nos. and official seal.

21. Period for which LCs may be opened

LC covering import of goods into Bangladesh against valid LCAF should be opened within the period,
if any, prescribed in the current lPO.

22. Firm contracts and credit reports

(a) LCs to be opened only against firm contracts AD should, before opening an LC, see documentary
evidence that a firm order for the goods to be imported has been placed and accepted. While
opening an LC, the AD should ensure that full description of the goods to be imported are given
in each credit along with the unit price of the merchandise.

(b) Credit Reports of the foreign suppliers

The ADs should also obtain confidential report on the exporters from their branches or
correspondents abroad or in their discretion, satisfythemselves as to the standing of the exporter by
consulting standard books of reference issued by international credit rating agencies acceptable to
the ADs in all cases where the amount of LC/contract exceeds USD 10,000 (Ten Thousand) against
proforma invoices issued directly by foreign suppliers and USD 20,000 (Twenty Thousand) against
indents issued by local agents of the foreign suppliers. Head Offices/ Principle Offices of all ADs shall
maintain a central database of collected reports and allow their ADs to use the relevant credit
reports of the foreign suppliers stored in the said database. Such reports should be obtained by the
ADs themselves and the reports if submitted by the importers should not be accepted. The ADs may
also, at their discretion and in their own interest, verify the standing of the beneficiaries even in
cases where the value of the credit is lower than the limits mentioned above. Credit report may
remain valid for a period of maximum twelve months from the date of issuance if no adverse report
comes to the notice of the AD. Moreover, credit report of the same supplier collected for one
importer may be used for other importers within the same validity.

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23. Approved methods of payment

LC may be established providing for payment to the country of origin of goods or any other country
except those countries imports from which are prohibited. The LC may provide for payment or
reimbursement in any freely convertible foreign currency, in the currency of the country of the
beneficiary or of the country of origin/shipment of goods, or by way of credit to the non-resident
Taka account of the concerned bank abroad. Payments for imports under barter agreements or
under foreign Loans/Grants can be made only in the manner specified for the concerned
barler /loan/grant.

24. Applications for remittances against imports

An AD may approve on behalf of Bangladesh Bank remittance against imports into Bangladesh
provided the conditions set out in section-l and elsewhere in this chapter are complied with and
provided also that the documents covering the import, whether under LC or otherwise, are received
through the AD concerned. ln case of import by post/courier, the ADs may make remittance without
prior approval of the Bangladesh Bank only if the parcel is addressed directly to the AD. Where the
parcel is addressed to an individual care of the AD/ to the individual direct, prior approval of
Bangladesh Bank should be applied for, in the manner laid down in para 28 below.

25. Remittance against discrepant documents/ documents received directly by the importers

ADs may allow remittance against discrepant documents /documents received directly by the
importers after the goods have been cleared from the customs, on the basis of the relative LCAF, the
authenticated copy of the customs bill of entry for consumption or customs certified invoice in the
case of import by post/courier and the relative invoices.

25. Advance remittance against imports

(i) Advance remittance permissible imports of goods and services into Bangladesh may be
for
effected by the Authorized Dealers without prior approval of the Bangladesh Bank, against
applications from the importers submitted with signed undertaking in the format of Appendix
5/10 provided that:

a) the purchase contract with supplier specifically requires advance paymen!

b) the supplier furnishes repayment guarantee acceptable to the AD from a bank abroad, to be
invoked for refund of the amount paid in advance in the event of the supplier's default in
delivering the goods or services as per contract. Such guarantee need not however be
insisted upon in cases of advance payments up to USD 5000 (Five thousand) or its equivalent
for any permissible import subject to compliance of the following instructions:

(1) ADs shall have to be ensured that the applicant-importers do not have bill of
entry/customs certified invoice pending for submission beyond the stipulated period of
four months (or such extension as permitted by Bangladesh Bank) against any earlier
remittance for imports;

(2) ADs shall have to be satisfied that repayment guarantee is not obtainable from the
suppliers against the remittances to be made in advance;
 Corporate Laws and Pructices

(3) to arrange for repatriation of the remittances

ADs shall, at their own responsibility, have
made in advance in case the entry of goods into the country is not effected within the
stipulated time;

(4) IPO in force shall have to be meticulously followed;

(5) Before effecting the advance payment, ADs shall obtain Form of Undertaking (Appendix-
5/15) duly filled in and signed by the importer.

(ii) Requests for advance remittance where the suppliers are unwilling or unable to furnish the
repayment bank guarantee referred to at para 27(ixb) may be forwarded by the ADs, along with
their recommendations, for specific decision of FEPD, Bangladesh Bank on merit of each case.

(iii) ADs shall report to the Bangladesh Bank the cases where the goods/services against advance
payments are not received in Bangladesh within due time as mentioned in Para 29 &31,.

ln addition to usual reporting to Bangladesh Bank, ADs within one week of advance remittance,
shall submit attested copies of (i) undertaking (as per Appendix 5/15) (ii) repayment bank
guarantee provided by bank abroad (iii) credit report of the guarantee providing bank abroad to
the FEPD, Bangladesh Bank, Head Office mentioning the probable date of import of
goods/services. However, advance payment for import from ERQ account may be done as per
relevant instruction mentioned in Section-lV, Chapter-13.

27. Application for remittance on Form IMP

(a) Form IMP for private imports: All applications for payments against imports into Bangladesh
(including imports by enterprises of EPZs/EZs from abroad) should be made on form IMP with
separation of FOB value, freight, insurance and other charges (See Appendix5/1,6). The form IMP
shall be submitted in one original by the importer or his duly authorized representative. ln cases
where empowered to approve the remittances on behalf of the Bangladesh Bank, the AD shall
endorse its approval on the reverse of the form IMP in the space provlded for the purpose. ln
other cases, the AD shall submit the form IMP together with required supporting documents to
the Bangladesh Bank for approval.

(b) Form IMP for government imports: The AD should mark with a bold letter "G" the IMP form for
remittance against an import in the name of a government department or office for which LCs
are opened by the AD. ln other cases, where LCAFs are issued to private parties and are marked
"On Government Account", the form IMP should be similarly marked with bold "G".

lndication on IMP form for Government lmports

The AD should mark with a bold letter "G" the IMP form for remittance against an import in the
name of a government department or office for which LCs are opened by the AD. ln other cases,
where LCAFs are issued to private parties and are marked "On Government Account", the IMP
forms should be similarly marked with bold "G".

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28. Submission of the authenticated copies of 'Bill of Entry'and 'Certified Invoices'

(a) Time for submission from date of remittance: ln all cases of remittances for imports into
Bangladesh, the importer must submit the relevant authenticated copy of the customs bill of
entry within four months from the dates of remittances. ln case of import by post/ courier, the
importer must submit the invoice certified by the customs authorities in lieu of the
authenticated copy of the bill of entry. Where the value of an import by post/courier is less than
GBP 5 (five) or its equivalent in other foreign currency, the customs authorities will issue a
certificate instead of certifying the invoices. ln such cases, the certificate may be submitted in
place of the certified invoices.

(b) Bill of entry against import on suppliers' credit (Usance /DA) term: ln case of imports on suppliers'
credit term, the prescribed period of four months for submission of bill of entry shall be
calculated from the date of acceptance of import documents.

(c) Bill of entry against import on buyers'credit/external credit: ln case of import under buyers'
credit/external credit, the period of submission of documentary evidence in support of imports
i.e. bill of entry shall be four months from the date of acceptance of import documents.

29. Extension of time limit for submission of bill of entry etc.

Applications for extension of the time limit beyond four months in cases of genuine difficulties, such
as delay in the arrival of the ship or difficulties in clearing the goods already landed at a port in
Bangladesh etc. shall have to be forwarded to Bangladesh Bank (FEPD, Head Office or other offices)
for consideration mentioning clearly the concerned IMP No. & LC/contract no. (as reported to the
'Online lmport Monitoring System'). Moreover, scanned copy of approval of extension of time limit
for submission of bill of entry shall have to be forwarded to FEOD ([email protected]),
Bangladesh Bank, Head Office.

30. Disposal of IMP Forms

(a)To effect remittance against import, AD shall endorse its approval on the reverse of the form IMP
in the space provided forthe purpose. lmmediately after import payment, AD shall make report
to'Online lmport Monitoring System'of Bangladesh Bank. Besides, import payment shall be
reported in usual monthly returns to Bangladesh Bank without attachment of form IMP. AD shall
continue to hold form IMP until the Customs certified bill of entry is received. During this stage
of non-receipt of Customs certified bill of entry, ADs shall, on demand, submit the form IMP and
full set of import documents to Bangladesh bank.

(b) When the authenticated copy of the bill of entry/customs certified invoice evidencing entry of
goods into Bangladesh, is submitted by the importer, the particulars therein should be matched
and checked with those in the IMP form and invoice filed earlier to see if the merchandise for
which remittance was made has been duly received in Bangladesh. ADs shall report the same to
'Online lmport Monitoring System' after necessary verification. lf no material discrepancy is
detected, the case should be considered closed. Afterwards, ADs shall retain the form IMP and
relevant bill of entry with full set of import documents including LCA form with them for record
and eventual inspection for a period of 5(five) years. However, in respect of cases which are
under investigation by Bangladesh Bank inspection team/other Government agencies, the form

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 Corporate Laws and Practices

IMP and full set of import documents including bill of entry shall be disposed of only after
obtaining clearance from the inspection team/Government agency concerned.

(c) Cases with material discrepancy between the particulars of merchandise for which remittance
was made and the merchandise actually received as evidenced by the authenticated copy of bill
of entry/customs certified invoice, and cases of non-submission of bill of entry/customs certified
invoice within four month of remittance/acceptance (as the case may be) should be reported on
monthly basis to FEOD, Head office or other offices of Bangladesh Bank, in proforma as given at
Appendix-5/17 and Appendix-5/18, by 10th day of the following month. Besides, 'Monthly
summary statement of non-receipt of authenticated copy of bill of entry/customs certified
invoice within due time' shall have to be submitted to FEOD Head office or other offices of
Bangladesh Bank within the same period as mentioned above (Appendix 5/1,9). The ADs should
also follow up with the importers the cases of material discrepancies and of non-submission of
bills of entry/ customs certified invoices within due time, lmporter who has failed to submit
authenticated bill of entry/certified invoice against any earlier remittance for import within the
stipulated time (or within the extended period allowed by Bangladesh Bank) will be barred from
opening new letter of credit without prior permission of Bangladesh Bank. However, ADs without
prior approval of

Bangladesh Bank, may open new LCs on behalf of importers who has bill of entry/certified
invoice unmatched till October 31.,2017 with lMPs (within stipulated time or allowed extended
period) to the tune of up to USD 200(two hundred) or equivalent, ADs shall continue its
endeavor for matching such unmatched bill of entry within shortest time. ADs shall duly report
to FEOD, Bangladesh Bank as and when the matching of such lMPs has been completed.
Bangladesh Bank may instruct AD to abstain from opening new LC in favor of those in whose
cases major discrepancy between the description, quantity etc. of goods stated in bill of
entry/customs certified invoice and the same declared on the eve of remittances of value
thereof is detected by Bangladesh Bank from the statement of the AD concerned. However,
customs certified bill of entries, which are being reported as 'non submission' due to failure of
submission within stipulated time, may be omitted from subsequent periodical report as 'non-
submission' without prior approval of Bangladesh Bank once they have been submitted in any
subsequent period.

To resolve the cases of unmatched overdue bill of entries (partial or full) due to non-
receipt/short receipt of goods as per LC/Contract/lMP, importers may arrange to receive the
unmatched amount in foreign currency (including associated bank charges) from the same
foreign supplier through banking channel. Once the refund is received from foreign supplier
abroad against non-shipment/short shipment of goods, etc., ADs shall report the same to the
'Online lnward Remittance Monitoring System'. Afterwards, ADs shall report to Bangladesh Bank
(FEOD, Head Office, Dhaka to mail lD: [email protected]) for recording the refund
information against the concerned IMP number reported to the Online lmport Monitoring
System. ln cases of failure of submission of bill of entry due to lost or damage of goods by
accident or auctioned by Custom Authorities or confiscated by Government etc., ADs may, apply
to Bangladesh Bank soliciting waiver of reporting of such cases as' non-submission' in their
periodic return to Bangladesh Bank with documentary evidences as per Para 32 below (as the
case may be).

(d) Separate folders for public sector imports: ln respect of all imports in the public sector the forms
should be kept in separate importer-wise folders till final disposal.

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 Corporate Laws und Practices

31. Loss ofgoods

ln the event goods are completely lost, duplicate copy of the IMP form should be forwarded to the
Bangladesh Bank giving full particulars of the loss and the manner in which the insurance claim has
been collected. ln the event of partial loss, the authenticated copy of the customs bill of entry for the
goods actually cleared should be submitted giving full particulars of the loss and the manner in which
the insurance claim has been collected.

32. LCs on deferred payment basis

Subject to compliance with other conditions laid down in this chapter and in the current lPO, import
is allowed on deferred payment/usance basis in the following cases:

(i) lmport of capital machinery and spares for own use by industrial importers on up to 360(three
hundred sixty) days usance basis;

(ii) lndustrial raw material imports for own use of industrial importers (including back to back
imports discussed in detail in the next Section) on up to L80(one hundred eighty) days usance
basis;

(iii) lmport of coastal vessels including oil tankers and ocean going vessels including those procured
for scrapping on up to 360(three hundred sixty) days usance basis;

(iv) lmport of agricultural implements and chemical fertilizers on up to 180(one hundred eighty) days
usance basis;

(v) lmport of life saving drugs (certified/declared as such by Drugs Administration Authority) on up to
90(ninety) days usance basis.

(vi) HR Coil, scrap, pig iron & sponge iron used for manufacturing of flat steel and long steel under
steel industries for being used in own factories on up to 360(three hundred sixty) days usance
basis.

For such deferred payment imports, the prices must be internationally competitive and usance
interest, if any, may bear mark-ups over LIBOR according to the prevailing market conditions
subject to overall cost not exceeding 6(six) percent per annum for the relative period.

(b) lmport against buyers' credit Buyers' credit from foreign banks and financial institutions may
be obtained for making import payments [for the items importable under usance basis as
mentioned in sub para (a) abovel arranged through designated Authorized dealers of the
importers in Bangladesh at the interest rate of not exceeding 6(six) percent per annum.

(c) Repayment against imports under suppliers' credit (deferred payment)/buyers' credit ADs
shall observe following instructions to settle import payments under suppliers' credit
(deferred payment)/buyers' cred it:

(i) Bullet repayment terms will be admissible only on financing for terms not exceeding six months,
and only on shipments not exceeding USD 1.00 (one) million or equivalent in value;

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(ii) Subject to exception as mentioned in Para 33(d) below, bullet repayment terms will be
inadmissible for financing exceeding USD 1.OO (one) million or equivalent in value or for terms
exceeding six months. ln such cases, the financing arrangements (contract/LC between importer
in

Bangladesh and supplier/creditor abroad) must stipulate quarterly repayments wherein the
repayment installment due after the first quarter may on prospective cash flow considerations
be set lower than the subsequent ones, subject to being not less than one tenth of the total
amount payable.

(d) Exemption of quarterly repayment

Quarterly installment repayment, as stated in 33(c)(ii) above, is exempted for deferred payment
imports in bulk of up to 6(six) month term regardless of import value for the following
u nprocessed/crude food items:

(a) unrefined edible oil and oil seeds imports by refiners/millers,

(b) crude sugar imports by refiners and
(c) unground (whole) wheat imports by flour mills.
(e) Reporting on buyers' credit

Head /Principal offices of all AD banks are advised to submit a monthly statement regarding use
of buyer's credit in foreign exchange in Form-BC (Appendix-S l2O) to FEpD of Bangladesh Bank,
Head Office by the 15th day of next month of fund drawal.

(f) lmport on longer terms

lnstructions regarding opening of import LCs on longer usance terms against suppliers' credits
obtainable by industrial enterprises in the private sector as per general or specific BIDA approval
are contained in Chapter 15 of this Guidelines.

33. Payment of import liability

(a) ADs shall make payment of import liabilities as per LC/contracts (both local and foreign) on
maturity. Failure in settlement of import liability as per credit/contract terms may result in
punitive actions including revocation of AD license by Bangladesh Bank.

(b) Banks are required to submit the following statements to FEOD, Bangladesh Bank, Head office
regarding overdue accepted bills through e-mail complying with the instructions mentioned in
Appendix 5/25:

(i) Monthly summary statement of overdue accepted bills (Appen dix slzt,
(ii) Monthly statement of overdue accepted bills -Local payables (Appendix-5/22)
(iii) Monthly statement of overdue accepted bills -Foreign payables (Appendix-5/23)
(iv) Monthly statement of overdue accepted bills -Local receivables (Appendix-5/24)

(v) Monthly bank-wise summary statement of local overdue accepted bills (Appendix-5/25).

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34. Payment in foreign currency against local supply of goods under international tender ADs may
establish letter of credit in foreign currency favoring local contractor to implement work order issued
by govt. authorities under international tender. Such LCs established in foreign currency shall be
settled through FC clearing accounts of the concerned banks maintained with Bangladesh Bank.
Foreign exchange thus received may be retained up to thirty days to settle import payment
obligations of the client as mentioned in Para az$i) of this chapter'

35. Payment of import bills from advance export proceeds retained in FC accounts of ship builder-
exporters General authorization has been given to ADs to open FC accounts on behalf of ship builder-
exporters for retaining export proceeds received in advance against ship exports. The balances of
these accounts may be used for input procurements. ADs should complywith relevant instructions in
operating the FC accounts (Please see Para 32, Section -Vl, Chapter 13)'

35. Remittance against purchase of software through e-delivery ADs may effect remittance against
purchase of software through e-Delivery subject to observance of the following instructions:

A. Customs assessment of the purchases: ADs may allow their customers to arrange customs
assessment of the software after being satisfied from the certificate issued by Bangladesh
Association of Software and lnformation Services (BASIS) to the effect that the purchase of
software is genuine and sourced from reliable supplier.

B. Outward remittances: On receipt of customs assessment order and documentary evidence of

payment of duties/taxes, ADs may effect payment against the purchase of the software subject
to compliance of the following conditions:

i) ADs shall be satisfied with the certification/license issued by the supplier that the software
has already been received by the purchaser;
ii) ADs shall observe due diligence and comply with AML/CFT regulations in respect of the
tra nsactions;
iii) Ads shall keep an authenticated copy of the certification/license issued by the supplier and
report the transactions to Bangladesh Bank in monthly returns/schedules.

Application for remittance without the procedure mentioned above shall require prior approval of
Bangladesh Bank.

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 Corporate Laws and Practtces

SECTION- ll!: BACK TO BACK LCS

37. General

The ADs may open back to back (BTB) import LCs against export LCs received by export oriented
industrial units operating under the bonded warehouse system, subject to observance of domestic
value addition requirement (stated in terms of permissible limit of value of imported inputs as
percentage of FOB export value of output) prescribed by the Ministry of Commerce from time to
time.

38. Opening of back to back import LC

Further to the relevant general instructions in the foregoing sections of this chapter, the following
instructions should be complied with while opening back to back import LCs:

Only recognized export oriented industrial units operating under bonded warehouse system will
be allowed the back to back LC facility. The unit requesting for this facility should possess vaiid
registration with the CCI&E and valid bonded warehouse license.

il The master export LC (against which opening of back to back LC is requested) should have
validity period adequate to cover the time needed for importation of inputs, manufacture of
merchandise and shipment to consignee.

ilt The back to back LC value shall not exceed the admissible percentage of net FOB value of the
relative master export LC (as per prescribed value addition requirement) and the price of goods
to be imported must be competitive. For computation of net FOB value of a master export LC,
the freight charge, insurance cost and commission if payable by the exporter shall be deducted
from the LC value. lf the freight element is not shown separately, a certificate from the shipping
company or the shipping agent should be asked for.

IV The back to back import LCs shall be opened on usance basis for a period not exceeding L80
days. lnterest for the usance period shall not exceed LIBOR or the equivalent interest rate of the
currency of settlement. Back to back LCs opened against (a) Export Development Fund (EDF)
administered by Bangladesh Bank andf or against (b) balances on Non-Resident Foreign Currency
Deposit (NFCD)Accounts may be on sight basis subject to the instructions at Para 20, Chapter 13
of this Guidelines

All amendments of the master export LC should be noted down carefully to rule out chances of
excess obligation under the back to- back import LC.

vi Back LC should not be opened against LCs received for export under Barter/STA,
to back import
without prior approval of Bangladesh Bank.

39
a) lnland back to back LC

lnland back to back LCs denominated in foreign exchange may be opened in favor of local
manufacturer-cum- suppliers of inputs, against master export LCs received by export oriented

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 Corporate Laws snd Practices

manufacturing units operating under the bonded warehouse system, up to value limits
applicable as per prescribed value addition requirement/utilization permit. However, EXP/IMP
form will not be applicable in such cases unless EPZ unit is associated.

b) BTB import LC against inland BTB LC

Back to back LC may in turn be opened for import of necessary inputs, against inland back to
back LC in favor of a local manufacturer- cum- supplier operating under the bonded warehouse
system, in accordance with the instructions, mutatis mutandis, at para 38 & 39 above.

c) Opening of LC in FC by exporters operating without bond license: As per decision of the National
Board of Revenue, a manufacturer-cum-exporter operating without bonded warehouse license,
may open usance LC and sight LC (against advance receipts of export proceeds) denominated in
foreign exchange favoring packaging industries, manufacturers of hanger and plastic goods
operating under bonded warehouse license against all types of export contracts (sales contract,
purchase order, proforma invoice, etc.) received from abroad.

d) Opening LC in local currency: Hundred percent export oriented industries/direct exporters shall
open and settle inland LC in foreign currency favoring manufacturer-cum-suppliers in the above
cases only. For procuring inputs from local traders/suppliers, LC shall be opened in local currency
only.

40. Payment settlement against BTB LCs

Payment abroad in settlement of usance bill against the back to back import LCs shall be made at
maturity, out of proceeds of the relative export repatriated in foreign exchange; the required foreign
exchange will be set aside, out of the export proceeds, in a separate foreign currency account in the
subsidiary ledger of the AD. Before making remittance against the back-to-back import bill, the AD
should see that the authenticated copy of bill of entry for bond in evidence of actual arrival of the
relative imports has been submitted. Usance bills against back to back import LCs should be settled
at maturity even where for some reason export has not taken place, or where the export proceeds
have not been realized, or where the realized export proceeds net of value addition requirement is
not adequate to cover the back to back import payment. ln such cases post facto approval of
Bangladesh Bank (Foreign Exchange Operation Department) will have to be sought for, explaining
fully the circumstances of export failure or non-realization/short realization of export proceeds, with
relevant supporting documents. Cases of failure of export against the relative master LCs should also
be reported to the National Board of Revenue (NBR) and the concerned Commissioner of Customs so
that they may monitor closely the level of stock of the relative goods in the bonded warehouse. A
copy of the letter to NBR reporting the export failure should be submitted to Bangladesh Bank along
with the application for post facto approval of remittance towards back-to-back import payment.
Also, all applications for post facto approval of such remittance in the event of export failure and
short realization/non-realization of export proceeds should be accompanied by the authenticated
copy of the relative bill of entry evidencing actual receipt of the back to back imports.

The AD should maintain effective watch on the stock of inputs procured under the back to back
arrangement and of finished products made therewith; any indicatlon of illegal disposal of stocks
from the bond coming to the knowledge of the AD should immediately be reported to the concerned
commissioner of customs and NBR.

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 Corporate Laws and Practices

4t
i. Retention of foreign currency in single pool for back to back import payments under bonded
warehouse system

(i) On encashment of export proceeds equivalent to the portion of value addition, residual
portion of export proceeds against different export bills of the same export unit operating
under bonded warehouse system may be maintained in foreign currency in a single pool by
the ADs. Funds from this pool may be used for different back to back import payments of the
same exporting unit on maturity basis to keep minimum involvement of AD's own fund
under the exchange position as well as to keep exporter free from debt burden.

ii. Payment of import bills (other than back to back) from direct and deemed export earnings

lf import bills (other than back to back LC) fall due for payment within 30 days from the date of
receipt of export proceeds by the exporters/deemed exporters, the ADs may, on application by
the manufacturers-cum-exporters retain such proceeds in foreign exchange for a maximum
period of 30 days for making such import payments even it exceeds the allowable retention
quota limit. However, export proceeds so retained (in excess of the usual retention quota
entitlement) shall be encashed compulsorily in Taka if the same is not utilized for such import
payment within 30 days from the date of receipt. To identify such transactions distinctly, ADs are
required to maintain appropriate register and other necessary records. Furthermore, Head Office
/Principal Office shall gather information of retention and utilization of foreign currency as per
Appendix 5/26, shall prepare a consolidated statement as per Appendix 5/27 and submit the
same to Foreign Exchange Operation Department, Bangladesh Bank, Head Office on monthly
basis.

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SECTION - tV: DEPOSIT OF COUNTERPART FUND lN RESPECT OF IMPORTS UNDER NON-PROJECT

COMMODITY LOANS/CREDITS/ GRANTS

42. Clean documents against LC

Counterpart funds against all clean documents except in cases of discrepant documents received on
collection basis or negotiated by the foreign banks under reserve, shall be deposited by the
designated bank in Bangladesh to Govt. Account No. lV A (or such other account of the Govt. of
Bangladesh as prescribed in respect of the relative loan/credit/aid) maintained with the Bangladesh
Bank within three working days from the date of receipt of documents; the said period shall be
deemed to be inclusive of the date of receipt of documents and the date of deposit of counterpart
funds to the Bangladesh Bank.

43. Documents against LC received on collection basis/negotiated under reserve due to discrepancy
ln cases where due to discrepancy, the negotiating bank abroad sends the documents on collection
basis or under reserve or otherwise the bank should forthwith arrange acceptance of the documents
by the importers and deposit counterpart funds within 5 days from the date of receipt of the
documents. ln case of non- acceptance, the bank should return the documents to the negotiating
bank or dispose of the documents in accordance with the instructions of the negotiating bank
abroad.

44. Documents received direct by the ERD or designated banks without opening of LC

Under some loans, credits and grants, LCs are not opened by the utilizing agencies; instead goods are
procured and shipped by the loan giving agencies themselves or by their nominated agencies. After
shipment of such goods the documents are mailed either to the Economic Relations Division (ERD) of
the Ministry of Finance or to the designated banks, as the case may be, for retirement of documents
and clearance of consignment from the customs authorities. On receipt of these documents, the
bank should forthwith arrange with the relevant agency to pay the proceeds of the bills within a
period of 7 days for deposit to the Bangladesh Bank. The agency should be warned that it would be
required to pay interest at penal rate in the event of delay in the deposit of the funds within the
stipulated period of 7 days; cases of default should be brought to the notice of the Bangladesh Bank
promptly.

a) Documents against LCs opened by designated banks on application through the banks of the
importers

ln case of LC opened by the designated bank against application through the importer's bank, the
latter must retire the documents not later than 24 hours from the time of receipt thereof from
the designated bank. lf payment is not made within this time limit, the designated bank will be
entitled to recover from the importer's bank any penal interest the former may have to pay to
the Bangladesh Bank.

b) ln case, however, the documents are not found in accordance with the terms of the LC, the
importer's bank should within 5 days from the date of receipt, either retire the documents or
send back the same to the designated bank. Any delay on this score will forfeit their right to raise
objection on the ground of discrepancies.

c) ln all the above cases, the designated bank must send the documents to the importer's bank
within 24 hours of receipt. For any delay at the designated bank's end, the penal interest relating
to the period of delay made by them will have to be borne by them.

302lFag*
 Corporate Laws and Practices

d) The designated bank will deposit Taka funds to the Bangladesh Bank within the time limit as in
the foregoing paragraphs. ln all cases of delay, it will be the responsibilitysolely of the
designated bank to deposit the Taka funds to the Bangladesh Bank at the earliest along with
interest at prescribed rate.
45. Application of rate of exchange

a) Counterpart funds under foreign commodity loans, credits and grants where forward contract
has been booked will be required to be deposited at the rate at which the relevant contract has
been booked.

b) Counterpart funds under foreign commodity credit agreements with barter component where
no forward contract can be booked, are required to be deposited at the B.C. selling rate
prevailing on the date of opening of LC.

c) Unless specified otherwise, in all other cases deposit of counterpart funds will be made at the
B.C. Selling rate ruling on the date of lodgment of the bill as applicable to cash import without
forwa rd cover facil ities.

45. Pena! interest

(i) An AD who has either opened an LC as designated bank or forwarded it to the appropriate
designated bank should be in all preparedness to follow the schedule for deposit of counterpart
funds as mentioned in the foregoing paragraphs. ln case of delay in making the deposit within
the prescribed period, the funds should be deposited to the Bangladesh Bank along with penal
interest computed on the following basis:
a. 5% above the bank rate-for the first seven days beyond the prescribed period.

b. 6% above the bank rate-for the subsequent period after the expiry of first seven days beyond
the prescribed period.
(a) All designated banks under foreign commodity loans, credits and grants will send, by the 15th of
the following month, a monthly statement of all LCs opened (Loan/Credit/Grant wise) as per
proforma in Appendix 5/28to the office of the Bangladesh Bank with which counterpart funds
will be deposited.
(b) Submission of particulars of LCs opened and discrepant bills
ln case any bill is received by any designated bank/importer's bank on collection basis due to
discrepancy in the bills or otherwise, from the negotiating bank abroad/loan giving agency/ ERD,
notice of retirement should be served upon the importer concerned within 24 hours of receipt of
such documents, for retirement of the bills against payment within the prescribed time limit,
under advice to the office of the Bangladesh Bank with which counterpart funds will be
deposited, as per proforma at Appendix 5/L7.
(ii)' At the time of deposit of counterpart funds designated banks will furnish to the Bangladesh
Bank a statement as per Appendix 5/18.

(iii)' lnstructions contained in the above paragraphs shall also be applicable in respect of
documents received at places where there is no office of the Bangladesh Bank.
(iv). LCs opened by the designated banks for imports under loans, credits and grants should not
provide for payment on deferred basis.

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CHAPTER 8: SECTION-l

EXPORTS

1. Exports

Govt. Notifications No. 1(6)/ECS/48 and 1.(7llECSl48 dated Lst July, 1948 issued pursuant to Section
12 of the FER Act prohibit export of any goods directly or indirectly to any place outside Bangladesh,
unless a declaration is furnished by the exporter to the Customs Authority or to such other authority
as the Bangladesh Bank may specify in this behalf that foreign exchange representing full export
value of the goods has been or will be disposed of in a manner and within a period specified by the
Bangladesh Bank.

2. Export exempted from repatriation of export proceeds

The prohibition mentioned above does not apply to the export of:

bonafide trade samples sent by registered exporter up to the value prescribed in the Export
Policy in force;

ii personal effects, whether accompanied or unaccompanied, of travelers;

iii ships stores and transshipment cargo;

iv goods shipped under the order of the Government of Bangladesh or of such officers as may be
appointed by the Government in this behalf or of the Military, Naval or Air Force authorities in
Bangladesh for Military, Naval or Air Force requirements.

ln the case of export by Post, a certificate signed by a Gazetted officer or by any person entitled to
use service postage stamp should be pasted on the outer cover of the parcel to the above effecU

gift packets where they are accompanied by a declaration by the sender that the contents of the
packet are less than the value as prescribed in the Export Policy in force and that the dispatch of
the packet does not involve any transaction in foreign exchange; and

vi. where the packet is covered by a certificate issued by the Bangladesh Bank to the effect that the
export of the parcel does not involve any transaction in foreign exchange.

Exemptions as above will be allowed by the Customs Authorities after being satisfied that the
relative exports qualify for such exemptions.

3. Export Trade Control Regulations

Foreign exchange regulations regarding exports cover all goods exported to all destinations
regardless of whether they are subject to Export Trade Control Regulations. Similarly, nothing in the
foreign exchange regulations relieves the exporters from the necessity of complying with the Export
Trade Control Regulations prescribed by the Government, including the necessity of obtaining export
licenses in case of goods the export of which requires such license.

4. Prescribed form for declaring exports

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 Corporate Laws and Practices

All exports to which the requirement of declaration applies, must be declared on the EXp Form
(Appendix 5/19). These forms will be supplied by the ADs to their exporter clients.

5. Method of receiving payments against exports

Payment for goods exported from Bangladesh should be received through an AD in freely convertible
foreign currency or in Taka from a non-resident Taka Account. Receipts against exports under various
barter and bilateral arrangements should be settled as per instructions issued by the Bangladesh
Bank from time to time,

6
(a) Registration of exporters: The ADs should, before certifying any EXP form, ensure that the
exporter is registered with the CCI&E under The lmporters, Exporters and lndentors
(Registration) Order 1981. The registration number should be quoted on the relative EXp forms.

(b) Online reporting: ln addition to other reporting requirements to Bangladesh Bank, Ads shall
report export transactions to the 'Online Export Monitoring System' of Bangladesh Bank on
regular basis.

7. Certification of EXP Forms by ADs

a) Before lodging the EXP forms with the Customs/Postal Authorities, the exporter should get
copies of the forms certified by an AD. After receipt of the EXP forms from the exporters for
certification purposes, the ADs will see and ensure that each set of the forms is duly filled in.
Thereafter, they will record full particulars of the forms in the Export Register to be maintained
as per proforma at Appendix 5/20 and assign a number for each set of the EXp forms in the
following manner, which is to be inserted in the space provided at the top of each form,

The first four boxes of EXP number will bear the branch code prescribed by the Bangladesh Bank
for each AD branch and the next 5 boxes are meant for mentioning the serial number of the
Export Register (Appendix 5/32) of the branch and the last two boxes are meant for mentioning
the last two digits of the year of registration. The ADs will also have to complete the forms
themselves by mentioning all the required information /particulars /code number etc. in the
forms at the appropriate places and certify the forms in the manner prescribed therein under
seal and signature of the authorized official of the AD.

b) ln order to avoid any loss of foreign exchange to the country, ADs shall not certify any EXp form
unless they have satisfied themselves with regard to the followings:

i. arrangements made for realization of export proceeds within the prescribed period;
ii. arrangements have been made for receipt of title to goods like Bill of Lading, Airway Bill etc.
by the AD on shipment of the underlying goods;
iii. the EXP form is signed either by the exporter or one holding valid legal power of attorney
from the exporter and the terms of the power of attorney are such that both the exporter
and the attorney may be held responsible jointly and severally for repatriation of export
proceeds;
iv. Bonafides of the buyers/consignees abroad and their credentials etc. where necessary, ADs
should make discreet enquiries in this regard through their correspondents abroad etc.,
greater care should be taken particularly in cases of shipments against contract alone and

305if)*E*
 Corporate Laws und Practices

shipments on CAD/DA basis. Where ADs doubt the bonafides and standing of the
buyers/consignees abroad or where owing to common interest or otherwise they suspect
collusion with the intent of' delaying or avoiding repatriation of export proceeds ADs should
report such cases promptly to Bangladesh Bank. Similarly, ADs should report to Bangladesh
Bank cases where it comes to their knowledge that the exporters are directly or indirectly
connected with or have any financial or other interest in the buyer/consignee abroad. Where
felt necessary, discreet enquiry about the bonafides and credentials of the charter party
should also be made in case the shipment is to be against a charter party Bill of Lading so as
to avoid loss of cargo /foreign exchange.

c) For delay in repatriation or non-realization of export proceeds, the exporters will render
themselves liable to punitive action under the FER AcL.,1947. Besides, in the event of non-
realization or short realization of export proceeds against shipment within the stipulated period,
ADs shall obtain from the exporter(s) and furnish to Bangladesh Bank full explanation as to the
circumstances resulting in non-realization/short realization. Therefore, in their own interest,
both exporters and the ADs should be alert and active in ensuring timely repatriation of expor'
proceeds.

8. Making out and delivery of shipping documents

t. That in respect of export of goods from Bangladesh (excepting export from Type A industrial
units located in the EPZs) to foreign countries by land route or by sea, the Railway Receipts, Bills
of Lading and any other documents of title to cargo should be drawn only to the order of an AD
designated for this purpose by the respective exporters and delivered to the Authorized
representatives of the ADs concerned and to none else. However, in case of export of goods, full
payment for which value has been received by the exporter in advance through the AD, the Bill
of Lading and other documents may be endorsed by the AD in favor of foreign importers and the
same may be sent directly to the importers abroad by the AD. There may be cases where goods
shipped from Bangladesh to the neighboring countries by land route or even by cargo vessels
reach the beneficiary earlier than the relative Bill of Lading, Truck receipts etc. This causes
inconveniences and involves payment of demurrage at the port of destination due to delay in
receipt of shipping documents. To overcome this problem, Shipping Companies may, at the
request of the negotiating bank in Bangladesh, issue Telegraphic Delivery Orders on their agents
in the relevant center directing them to deliver the goods to the order of the AD bank's
correspondents in the buyers' country. A copy of the telegram /telex/swift message, duly
authenticated by the Shipping Company /Agent, should be passed on to the relevant AD who
would send his own tested cable /telex/swift instructions to his overseas correspondent asking
the latter to hand over the Delivery Order to the consignee and stating the amount to be realized
from the consignee before the Delivery Order is released. The usual shipping documents namely,
invoice, bill of lading etc. may be dispatched to the correspondent bank as usual.

il ln respect of export of goods from Bangladesh (excepting exports from Type A industrial units
located in the EPZs) to foreign countries by air, the Airway Bills and any other documents of title
to cargo should be drawn to the order of a bank in the country of import nominated by the AD
designated for this purpose by the respective exporters and delivered to the Authorized
representative of the AD. However, in case of export of goods, full payment for which has been
received by the exporter in advance through the AD, the AD may allow the Carrier Company to
draw the documents to its own (AD's) order and then endorse the documents including the
Airway Bill in favor of the foreign importers. The same may be sent directly to the importers

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 Corporate Laws and Practices

abroad by the AD. The above directions shall not apply to exports exempted from repatriation of
export proceeds and listed in para 2 of this chapter. Exports of fresh fish, vegetables, fruits,
poultry and other goods of perishable nature are also exempted from this direction. The
documents of title to cargo like Bill of Lading, Airway Bill in respect of goods shipped from the
fully foreign-owned enterprises (Type A industries) in the EPZs may also be drawn in favor of the
consignee /LC opening bank.

ln case of negotiation of export bills by using FCRs or HAWBs issued by the freight forwarders,
the following additional conditions are to be fulfilled:

IV the export letter of credit and the export sale contract specifically provide for negotiation of
export bill against FCR/HAWB ( as the case may be) issued by a freight forwarder;

The freight forwarder issuing the FCR/HAWB is operating in Bangladesh with authorization from
the Bangladesh Bank under Section 18.A of the FER Act,1947;

VI ADs will be responsible for satisfying themselves about the arrangement for timely repatriation
of proceeds of export bill negotiated against FCR/HAWB.

9. Endorsement of shipping documents by the ADs

The ADs to whose order the relative Railway Receipts, Bills of Lading etc. are drawn shall endorse the
same to the order of their foreign correspondents but in no case they shall make any blank
endorsement or endorse it to the order of the consignee unless they have obtained specific or
general approval of the Bangladesh Bank thereof. However, in the cases of export from Type A
industrial units located in EPZs, Bill of Lading/Airway Bill /other documents of title to cargo drawn to
the order of the AD may be blank endorsed or endorsed in favor of the consignees as per terms of
the export LC /export contract.

10. Disposal of EXP forms

i. The EXP Forms are in quadruplicate. ln all cases the forms will be completed and signed by the
exporter or his Authorized agent.
ii. After completing the EXP forms the exporter should submit all copies to the AD for certification.
After the forms are certified by the AD, these should be submitted to the Customs/Postal
Authorities along with the shipping bill at the time of shipment. The Customs Authorities after
filling in the portion relating to them and affixing therein their seal and signature will return the
duplicate, triplicate and quadruplicate copies to the exporter/his Authorized agent. The original
copy will be forwarded by the Customs Authority to the respective office of the Bangladesh
Bank.

iii. Submission of export documents to Ads

The exporter must submit all the remaining copies of the EXP Form along with the invoices etc.
to the AD through whom payment for the goods exported is to be received. An extra copy of the
shipper's invoice must be attached to the duplicate & triplicate copy of the EXP form for
submission to the Bangladesh Bank. ln the event of payment being received through an AD other
than the one who certified the EXP forms, the AD negotiating or collecting the export documents
should convey the particulars of the EXP form to the AD that had originally certified the EXp form
to enable the latter to make a suitable note in the relative export register.

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 Corporate Laws antl Prsctices

All shipping documents covering goods exported from Bangladesh and declared on EXP form
must be passed through the medium of an AD within 14 days from the date of shipment. The
copies of the EXP Form and the shipping documents etc. should be submitted to the AD in time
to enable it to submit the certified duplicate copy of the EXP Form to the Bangladesh Bank within
14 days from the date of shipment of the goods covered by the form.

iv. Scrutiny of documents

On receipt of the EXP Form and the documents covering the exports the ADs should compare the
signatures appearing on the bills of lading with the specimen signatures of the duly Authorized
officers of the Steamer Companies on record to ensure genuineness of the documents. The AD
should also compare the relative bill and/or documents with the relative form and satisfy itself
that the declaration made on the form is correct and the method of finance stated thereon is a
permitted one and that the amount for which the bill is drawn or the invoice is written is not less
than the invoice value stated on the form. The invoice value should also be checked against the
Taka value taken for Customs purposes as shown on the form, against Taka Value under the
space for the shipping bill number. ln no case the invoice value should be less than the value
declared for Customs purposes. Special care should be exercised in the checking of the invoices
with a view to detecting undervaluing of exports. Any suspicious circumstance should be
reported to the Bangladesh Bank.
v. lf the difference between the value stated on the EXP form and the amount of the bill/invoice is
small and accounted for by legitimate trade charges etc. the AD may accept the bill /documents
for negotiation /collection. The details of such adjustments must be given on the relative form
and must be authenticated by the AD under its stamp and signature.

vi. After negotiation of the bill or acceptance of the documents for collection, the ADs should
complete the certificates in this behalf in the space provided on the duplicate copy of the EXP
Form to the effect that they have negotiated bills/received shipping documents for collection for
the value stated on the form.
vii. After realization of export proceeds in foreign currency or by debit to a non-resident Taka
account, ADs shall certify on the reverse of the Second Original EXP form and shall report the
same to 'Online Export Monitoring System' of Bangladesh Bank. As usual ADs shall, without
attachment of EXP Form, report the realization of export proceeds in relevant schedule of
monthly returns to Bangladesh Bank. Afterwards, ADs shall retain Second Original EXP form with
them for record and eventual inspection for a period of 5(five) years. However, in respect of
cases which are under investigation by Bangladesh Bank inspection team/other Government
agencies, the EXP form and full set of export documents shall be disposed of only after obtaining
clearance from the inspection team/Government agency concerned.

viii. Exports subject to receipt of advance payments or confirmed and irrevocable LC

ln the case of commodities export of which is subject to receipt of advance payment or

confirmed and irrevocable jute), shipments will be allowed by the Customs only
LC (such as raw
on the basis of the certificate of the AD on the EXP forms to the effect that either advance
payment or confirmed and irrevocable LC has been received covering export of the goods
mentioned on the EXP form.

11. Deduction of commission, brokerage or other trade charges

(a) Commission, brokerage or other trade charges due to be paid to foreign importers or agents by
exporters in Bangladesh relating to the particular shipment may be deducted from the relative

308 1i).rg*
 Corporate Luws and Practices

bill amount or the amount of the sale proceeds or remitted from Bangladesh after the full
proceeds have been realized only up to a maximum of 5% of the value of the goods. ln
exceptional cases or where it is customary in any particular trade to pay commission in excess of
5% by deduction from the invoice value of exports, the Bangladesh Bank may consider
applications by exporters through their banks and may grant a standing authority to permit
payment of commission in excess of 5% of the invoice value. Production of documentary
evidence indicating the arrangement necessitating the payment of commission in this manner
will be mandatory.

(b) ln the case of export of books, journals and magazines published in Bangladesh, the exporters can
allow without prior approval of the Bangladesh Bank discount up to 33.5% in all of the invoice
value. For allowing discount in excess of the 33.5% of the invoice value, the exporters may
approach the Bangladesh Bank for prior approval.

12. Using appropriate incoterms

ln form, ADs shall use appropriate incoterms issued by the lnternational Chamber of Commerce.
EXP
ADs are allowed to use any of the terms as EXW, FCA, FOB, FAS, CFR, ClF, CPT, CIP and DAF provided
those are stipulated in the relevant LCs or sales contracts. ADs are however, strongly advised to
inform the exporters about the risk and responsibility involved in such cases. While certifying the EXP
Forms, the ADs must show the FOB or its equivalent value and cost of freight, insurance and other
charges separately on the EXP forms. The ADs, while certifying realization of the export proceeds will
in addition to the certificate in the appropriate column, also indicate on the reverse of the
duplicate/triplicate form the FOB equivalent value, insurance and freight separately. For this
purpose, they may use a rubber stamp as appropriate.

This is to mention that, FCA incoterm will be used in LC/contract if goods are to be delivered by
exporters to the buyer's nominated person prior to loading on board a vessel. Exporters may face
additional risks and incur extra costs if FOB term is used in such cases instead of FCA. ADs are
therefore, advised to satisfy themselves that contracts/LCs reflect accurate terms and conditions of
the lncoterm stipulations before advising the same to the beneficiaries. lnconsistency, if any, should
be informed immediately to the LC issuing bank for necessary amendment with intimation to the
beneficiary. ADs shall also keep their exporter customers informed of the appropriate terms and
conditions against applicable lncoterms for export so that they can insist foreign buyers to get LCs
issued/contract accordingly.

13. Prescribed period within which payment should be received

The period prescribed by the Bangladesh Bank within which full foreign exchange proceeds of
exports must be received by exporters is four months (Vide Bangladesh Bank Notification No. FE
1-/77-BB dated 16th April, 1977). lf the receipt of the full proceeds of any shipment is delayed beyond
this period without a special or general authorization from the Bangladesh Bank, the exporter will be
liable to action under the FER Act.

(b) Permissible period for repatriation of export proceeds against export lo EPZs/EZs: Permissible
period for repatriation of export proceeds against export to EPZsIEZs through land route shall be
countable from the date of onboard land transport specified in transport receipt. Accordingly,
ADs shall, while EXP reporting, report this date of transport as 'date of shipment' to 'Online
Export Monitoring System' of Bangladesh Bank.

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14. Export of rawjute and jute goods on usance basis

General authorization has been accorded to ADs for allowing exports of raw jute and jute goods on
up to 360 days usance basis against irrevocable LCs confirmed at buyer's cost from first class
international banks abroad. This requirement of third bank confirmation may be waived if the AD is
satisfied about the prospect of receiving payment in time, taking into account the country risk, the
counterparty risk (the reputation and financial standing of the buyer) and the reputation and
standing of the LC opening bank as ascertained from standard reference sources and/ or foreign
correspondents of the AD. The AD should also satisfy itself that the export price quoted is
internationally competitive and that the usance interest loaded is at a rate commensurate with the
prevailing interest rate in the concerned currency.

15. Reporting of overdue cases

(a) Head Offices/ Principal Offices of the ADs will submit to the Foreign Exchange Operation
Department, Bangladesh Bank, Head Office monthly statements showing the total figures of all
export bills including partly unrealized relating to all their AD branches outstanding at the end of
each month in the proforma prescribed (See Appendix 5/21,)by the 10th of the month following
the month to which it relates.

(b) Area/Principal Offices of the ADs are required to submit monthly statements of particulars of
export bills outstanding beyond the prescribed period of realization as at the end of each month
to the concerned area offices of Bangladesh Bank in the prescribed proforma (See Appendix
5122),. The statement should be prepared as per instructions contained in the reverse of the
proforma . The ADs should quote the reference number and date of the Bangladesh Bank's
permission in the remarks column in case any extension of time for repatriation of export
proceeds has been allowed by the Bangladesh Bank. The statement should be submitted within
10 days from the date of the relevant month closes. ADs should ensure timely submission of the
statement and should also ensure inclusion of all overdue export cases in the statement without
any omission.

t6.
i. Part drawings and advance remittances

lf it is customary in any particular trade for exporters to draw bills for only a percentage of the
invoice value, the balance to be paid after arrival of goods at destination, the ADs may negotiate
bills in the part amount provided they obtain an undertaking from the exporters that they will
realize the balance within the prescribed period. The ADs should report such part receipts to the
Bangladesh Bank on "EXP form Not Attached Voucher" (See Appendix 18 of Vol-2) on the
appropriate schedule.

It the responsibility of the ADs to follow up each such case and to ensure that the balance
is
amount is also realized within the prescribed period. This exemption will not, however, apply in
the case of shipments of those goods which are subject to either 100% advance remittance or to
the opening of confirmed or irrevocable LC for the full amount of the export.

Partial receipt of advance remittance

Where part of the invoice value has been received in advance by the shipper, the AD while
negotiating /collecting documents for the balance, should certify on the duplicate of the EXP

3101P*g*
 Corporate Laws and Practices

Form that part of the amount has been received by them in advance quoting reference to the
return on which the receipt was reported on an "Advance Receipt Voucher" (See AppendixtT of
Vol-2). The triplicate copy of the EXP Form should be kept outstanding by the AD until the full
value of the exports has been received.

17. Short shipments

Where a portion of a consignment is short shipped and the exporter consequently draws a bill or
writes an invoice for a quantity less than that entered on the original copy of the relative EXP Form
submitted to the Customs, he must make a declaration on the remaining copies of the form
submitted to the bank negotiating the bills that the shipment was partially shut out specifying the
quantity short shipped.

ln all cases of short shipments, the exporters should give notice of short shipment on the prescribed
form in duplicate to the Customs who will forward a certified copy of the notice to the Bangladesh
Bank. This notice should bear the number and date of the relative EXP Form in respect of which
goods have been short shipped.

18. Shipments shutout entirely

Where a shipment to be made by a particular vessel is entirely shut out and re-shipped by another
vessel, the exporter should apply on the prescribed form in duplicate to the Customs for permission
to alter the name of the vessel on the relative EXP form and the shipping bill, stating on the
application the number and date of the relative EXP form to which the application relates. The
Customs will forward a verified copy of the application to the Bangladesh Bank.

Where a shipment is entirely shut out and is not being re-shipped immediately by any other vessel,
the exporter should give notice accordingly in the prescribed form in duplicate. The Customs will
forward a verified copy of the notice in respect of the shipment entirely shut out to the Bangladesh
Bank in order that the relative EXP Form may be treated as cancelled.

19. Shipments lost or damaged in transit

lf shipments from Bangladesh are lost in transit for which payment has not already been received
either by a direct remittance or by negotiation of bills under an LC, the AD must see that an
insurance claim is made as soon as the loss is known. The Second Original copy of the relative EXP
form should contain a statement on the reverse thereof, under the stamp and signature of the AD
that the shipment has been lost, together with the following particulars regarding the insurance
covering the shipment:
(a) Amount of insurance (including currency in which drawn).
(b) Name of the lnsurance Company.
(c) Place where the claim is payable. Where the claims are payable in a currency other than Taka,
they should be realized through the AD who had certified the Second Original copy of the
relative EXP form and who, on satisfaction of the claim, should certify on the Second Original
copy the particulars of the amount collected by itself and preserve the same by itself.

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 Corporate Laws and Practices

20. Receipts of advance remittances against exports

Before paying out money against remittances received from abroad, whether against purchase of
foreign currency or debit to a non-resident taka account of a foreign bank in case where purpose of
the remittance is stated to be advance receipt for goods to be exported from Bangladesh, the AD
should obtain a declaration from the beneficiary on the "Advance Receipt Voucher" certifying the
purpose of the remittance with report to the 'Online ARV Reporting Module'.

21. Shipments on FOB basis

ln cases, where exporters arrange insurance cover and freight in Bangladesh but prepare invoices on
FOB basis, the ADs should verify from the bills of lading that freight has not been prepaid in
Bangladesh. All cases where freight or insurance has been paid in Bangladesh but export documents
are on FOB basis should be reported to Bangladesh Bank.

22. Export proceed realization certificate against direct and deemed exports

Sometimes exporters are required to submit evidences of export and realization of export proceeds
to various government agencies against direct and deemed exports. ln such cases, Ads may issue
Proceed Realization Certificate (PRC) against direct and deemed export (as the case may be) after
being confirmed about the realization of such proceeds. ADs shall use separate proforma for
issuance of direct export PRCs and deemed export PRCs. ADs shall follow the instructions in case of
issuance of PRCs as under:

a) ADs shall use prescribed proforma in Appendix 5/36 to issue PRCs for proceeds realized against
direct exports while prescribed proforma in Appendix 5/37 shall be used to issue PRCs for
proceeds realized against deemed exports.

b) ADs shall issue original PRC for the requiring government authority as usual while another copy
stamped/typed in bold 'Verification Copy' at the top of the prescribed proforma is to be issued
for onward submission to the concerned Area Office of Bangladesh Bank.

c) ln case of issuance of PRC against deemed exports, ADs are required to submit additional
information such as beneficiary's name, bill reference, paying bank branch's name, realized
amount, date of realization etc. with the monthly returns in support of the transactions to be
reported as per Para L3(a), Chapter 2 of the GFET (Vol-2).

d) ADs shall submit monthly statement embodying a list of issued PRCs with corresponding
reporting reference enclosing 'Verification Copy' of PRCs and copy of relevant schedules and
additional information as mentioned in above para for post facto checking/verification to the
Area Offices of Bangladesh Bank by 15th of the following month. A 'Verification Copy' has to be
preserved by the ADs for eventual inspection by Bangladesh Bank inspection team and for
verification by other government agencies.

e) Head Office/Principal Branch of the AD shall send updated list of its officials along with their
specimen signatures, PA nos. and phone numbers who are Authorized to sign PRCs to the Offices
of the 'Bond Commissionarate' and 'Duty Exemption and Drawback Office (DEDO)' from time to
time for verifying the genuineness of issued PRCs.

11r t|
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 Corporate Luws and Practices

ADs are advised to exercise utmost caution in issuing PRCs to avoid any possible misuse. Any
irregularity shall be treated as violationof Bangladesh Bank's instructions. ADs are also advised
to extend their full co-operation to different government agencies regarding verification of any
PRC, if approached.

23. Export of software, data entry/processing and other services

Foreign exchange earnings from export of computer software, data entry/data processing and other
services through compact disk, flash drive, V-Sat, lnternet or other electronic/magnetic media shall
be realized and reported to Bangladesh Bank by AD as per following guidelines:

a) Where export is undertaken in physical form:

of merchandise exports, EXP procedure as described in para 7 shall be followed

As in the case
where export is undertaken in physical form, that is, where computer software and data
entry/data processing services are exported in compact disk, flash drive, tape etc,

b) Where export is undertaken in non- physicalform

EXP procedure will not be applicable for export undertaken in non-physical form such as V Sat,
lnternet or other electronic media. For collection of proceeds against exports in non-physical
forms, instruction mentioned in sub para (1), (2), (3) & (4) shall have to be followed by ADs and
exporters concerned.

(1) Export on non-physicalform: Business Process Outsourcing

Firms/companies/individuals may provide services outsourced by non-residents through internet like

data processing, data entry, etc. rendered from Bangladesh in non-physical form, against which
payments in foreign exchange are received through ADs. The payments against these services are
normally due on delivery of the services and it may not necessarily require documents for collection
of export proceeds. ln these cases, ADs are free to credit the receipts in foreign exchange to the
account of the relevant service exporter in equivalent local currency and/or in ERQ account Iup to
admissible portion as mentioned in Para 27{c,d), Chapter 131 maintained in the name of the
respective exporter subject to observance of the following terms and conditions:

(i) ADs shall satisfy themselves on examination of the relevant documents (such as e-mail
communication) and the message (such as SWIFT) relating to the inward remittance that the
payment has been received from the respective non-resident customers to whom services have
been delivered in accordance with specific arrangements;

ii) ADs shall ensure that the individual beneficiaries have necessary capacities to provide the
underlying services;

iii)ADs shall encash the inward remittance on receipt of Form C (Appendix 5/10 or 5/L1, as the case
may be) duly filled in from the beneficiaries. To mention, separate Form C (Appendix 5/11) shall
be used for reporting inward remittance on account of ICT related services for easy codification
of the purpose and usual report to Bangladesh Bank in relevant statement/schedule and online
reporting module. ADs are instructed to adhere to the instructions enumerated in the Form

313 lFagr,
 Corporate Laws and Practices

(Appendix 5/11) while reporting inward remittances on account of ICT related services. However,
inward remittance up to USD 10,000 (ten thousand) or equivalent against service exports may be
credited in the respective accounts of service exporters without obtaining declaration on Form C.
ln this context ADs shall satisfy themselves bonafide of the transactions with the notation of the
relevant SWIFT message. ln case of non-availability of required information, ADs shall contact
the beneficiaries through e-mail about the purpose of transactions;

iv) ADs shall ensure deduction of applicable taxes, if any;

v) ADs shall exercise due diligence in respect of the transactions and comply with foreign exchange
regulations, AML/CFT standards and other relevant laws/regulations in force; and

vi) ADs shall keep records in support of the transactions and report the same in relevant monthly
schedules/statement to Bangladesh Bank.

There are other service exports such as business services, professional/research and advisory
services, etc. rendered from Bangladesh against which payments in foreign exchange are
received through ADs. Remittances from abroad as payments against these and all other non-
agency service exports in non-physical form may also to be credited to local currency accounts
and ERQ accounts in the names of the concerned exporters, subject to observance of the same
instructions as stated above.

(2) Repatriation of export proceeds through OPGSPs

ADs are allowed to offer the facility of repatriation of remittances against small value service exports
in non-physical form such as data entry/data process, business process outsourcing etc. through the
OPGSPs, subject to compliance of the following instructions: (i) ADs shall enter into standing
arrangements with internationally recognised OPGSPs and maintain separate Nostro collection
account for each OPGSP to repatriate the above mentioned service export related payments. Service
exporters availing of this facility shall open notional accounts with the OPGSPs. lt is to be ensured
that no funds are retained in such accounts and all receipts should be automatically swept and
pooled into the Nostro collection account maintained by the ADs.

(ii) This facility shall only be available for service export in non-physical form of value not exceeding
USD 5000 (USD five thousand).

(iii) The following debits will only be permitted to the Nostro collection account opened and
maintained under this arrangement:

a. Repatriation of funds representing service export (as mentioned above) proceeds to

Bangladesh for payment to service exporters;

b. Payment of fee/commission to the OPGSP as per the predetermined rates/

frequency/arrangement; a nd

c. Charge back to the service recipient/importer where the service exporter has failed in
discharging the obligations as per specifications.

(iv) ADs shall repatriate the balances held in the Nostro collection account and arrange to credit the

314 lFng*
 Corporate Laws and Practices

respective exporter's account with a bank in Bangladesh on being confirmed that the export
proceeds have been swept and pooled into the Nostro collection account from the exporter's
notional account.

(v) ADs shall satisfy themselves as to the bonafide of the transactions on examination of relevant
documents and credit the amount, repatriated from the Nostro collection account, to the
exporter's account on receipt of Form-C duly filled in (if applicable). However, ERQ account of
the exporter may be credited up to the permissible limit of the total proceeds in accordance with
the instructions laid in chapter 13, section lV of this Guidelines. ADs shall also ensure deduction
of applicable taxes, if any and payment thereof,

(vi) Besides reporting the transactions to Bangladesh Bank in monthly schedules/statements, ADs
shall submit all the relevant information/documents relating to any transaction under this
arrangement to the Bangladesh Bank, as and when advised to do so.

(vii) Each Nostro collection account shall be subject to reconciliation and audit on a quarterly basis in
terms of Para7, Chapter 4 of this Guidelines.

(viii) Resolution of all payment related complaints of exporters/service providers in Bangladesh shall
remain the responsibility of the OPGSP concerned.

(ix). ADs entering into arrangement(s) with any OPGSP(s) shall report to FEPD, Bangladesh Bank,
Head Office, Dhaka with necessary details.

(x) ADs shall exercise due diligence in respect of the transactions with OPGSPs and comply with the
foreign exchange regulations, AML/CFT acts/regulations and any other relevant laws/regulations
in force.

(3) Repatriation of lcr related service income through international card

ADs may provide facilities to credit inward remittances received in international card
number/account against the services provided by individual developers/freelancers of mobile Apps
a nd Ga mes having acknowledgements/training/boot-cam ps/hackathons/course participation

certificates on mobile application development arranged by government authority/ BASIS, or its

member organization and any other recognized training/academic institutes. ln this context, ADs
shall issue to individual developers/freelancers international cards (termed as 'Freelancer Card')
having duel currency units with features of being prepaid from abroad and observe the following
instru ctions:

(a) On receipts of the payment, up to eligible ERQ portion (Section-lV, Chapter 13) may be credited at
the options of beneficiaries in foreign currency unit of the card, the remainder mandatorily in
local currency unit after conversion at prevailing exchange rate.

(b) The balance held in foreign currency unit of the card as ERQ is usable for payment, through usual
banking channel, on international current account transactions for bonafide business expenses
including legitimate expenses for personal purposes. The cards may be used for permissible
online transactions from Bangladesh mentioned in Para 40, Chapter 10, para g, 11(BXii) &
L2(only visa processing), Chapter 11, Para 28(i), Chapter 13, Para 1,6&11, Chapter 19. Outward
remittances from foreign currency balance are subject to fulfillment of taxes payment
obligations, if any.
 Corltorate Laws and Pructices

(c) lnward receipt exceeding USD 10,000(Ten thousand) or equivalent is subject to declaration on
Form-C (lCT), Appendix 5/1"1.

(d) ADs shall report the transactions to Bangladesh Bank in relevant statement/schedule and online
reporting system mentioning appropriate code relevant to ICT/computer services.

(4) Receipt of payment through acquiring banks

ln addition to transmission of lT enabled products through V-Sat, lnternet or other electronic media,
lT/Software exporting firms may sell their products/services to the customers abroad through
web/internet. ln the context of web based trade, ADs may work as 'Acquiring Banks' for realization of
internet/web generated payment through lnternational Credit Card favoring BASIS member
lT/Software firms registered and operating in Bangladesh subject to compliance with following terms
and conditions:

i) ADs shall have the merchant agreements with the beneficiaries;

ii) ADs shall have to be satisfied that the beneficiaries have necessary arrangement for safe internet
transactions;

iii) ADs shall have to be ensured that the beneficiaries have necessary approval, where applicable,
from the competent authorities for conducting the business and are member firms of BASIS.;

iv) ADs shall have to be satisfied that online payment is relevant with the nature of business of the
beneficiaries;

v) ADs shall make the payment, credited to their nostro accounts, available to beneficiaries'
accounts on receipt of Form-C (lCT), Appendix 5/11 duly filled in from the beneficiaries. The ERQ
accounts of the beneficiaries may be credited to the extent of permissible limit from the total
payment provided that the transactions deserve such credits as per instructions mentioned in
Chapter 13, Section lV.

vi) ADs shall comply with the relevant instructions contained in paragraph 23(bX1) above;

vii) ADs shall keep records of the transactions with documentary evidence in support of the
payment.

viii)ADs shall have to comply with the applicable regulations of foreign exchange transactions,
AML/CFT, payment and settlement systems and other relevant laws/regulations in force and
report the transactions with monthly returns to Bangladesh Bank in the relevant
schedules/statements.

c. Time limit for repatriation of export proceeds

Unless specific approval is obtained from Bangladesh Bank, the entire export proceeds in case of
export in physical form must be repatriated within four months of export as usual. Particulars of
overdue exports in physical form shall be reported as per Appendix 5/35.

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24. Export Development Fund (EDF)

AD banks can borrow US Dollar funds from the EDF administered by Bangladesh Bank against their
foreign currency loans to manufacturer-exporters for input procurements. The details operational
procedures are available in the relevant FE Circulars/Circular Letters issued by Bangladesh Bank from
time to time.
25. Discounting of direct and deemed export bills in foreign exchange
Beneficiaries of usance export bills against direct and deemed exports of products produced in
Bangladesh may arrange to discount bills for immediate financing through their own AD banks
subject to compliance of the following instructions:

a) ADs shall have to be ensured that the usance bills presented for discounting are out of bonafide
di rect/deemed export tra nsactions;
b) ADs may arrange fund against the discounting of usnace bills in foreign exchange through their
own OBUs/correspondent banks, financial institutions abroad or international financing
institutio ns;
c) Expenses of the customers for discounting bills shall not exceed 6% (all in cost) including all types
of comm issions/cha rges/fees/i nterests;

d) AD banks shall submit statement(Appendix 5/38) to FEPD, Bangladesh Bank, Head Office of
discounting of direct/deemed export bills in foreign exchange on monthly basis by 15th day of
the following month.
However, proceeds from such discounting (after payment of BTB LCs of concerned exports) may be
retained in single pool as per instruction mentioned in Para 42(i), Chapter 7 for future import
payments including BTB liabilities.

Type C units of EPZs and EZs can avail this facility under the stipulations as mentioned in Para 23,
Chapter 16.

25. Re-export and Entre-port Trade

of Bangladesh are subject to the guidelines of

Re-export and Entre-port trade by the exporters
Ministry of Commerce disseminated through lmport Policy Order and Export Policy in force
published from time to time. However, ADs will abide by the following instructions in conducting
foreign exchange transactions in such cases:

a Compliance with relevant instructions of Ministry of Commerce including prescribed minimum

value addition requirement is to be ensured;

b. ln case of re-export, import value (including freight) will be met from repatriated export value
only. Besides, usual IMP and EXP procedure will have to be followed in import (including freight)
and export of goods respectively;

c. ln case of entre-port, import value (including freight) will be met from repatriated export value
only. Declaration in 'Form C' and 'Form TM' shall be used for reporting receipts of export value
and making import payment (including freight) respectively.

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 Corporute Luws and Practices

sEcTtoN - lt

EXPORT FROM THE EXPORT PROCESSING ZONES

27. Principles and Procedures

Export Processing Zones (EPZs) have been established by the Act namely, Bangladesh Export
Processing Zone Authority Act, 1980. The following types of industrial units operate in the EPZs:

(a) Type A: 100 percent foreign owned including those owned by Bangladeshi nationals ordinarily
resident abroad;
(b) Type B: Joint venture projects between foreign and Bangladesh entrepreneurs resident in
Bangladesh;

(c) Type C: 100 percent Bangladeshi entrepreneurs resident in Bangladesh. Developers and different
service providing companies (water supply/treatment, cleaning, dust management, effluent
treatment plant, etc.) operating in EPZs, exclusively formed and registered to serve a particular
EPZ will be treated as industrial units of EPZfor foreign exchange regulation purposes.

The broad guidelines relating to the operation of industrial enterprises in the EPZs are contained in
the "Principles and Procedures governing setting up of industries in EPZ" issued by the BEPZA.
28. Repatriation of export proceeds from the EPZs

Exports from EPZs are subject to the usual requirement of declaration of exports in EXP Form and
repatriation of export proceeds. For identification, EXP forms for these exports should be rubber
stamped or over printed with words "EXPORT FROM EPZ" in bold letters.
29. Disposal of export proceeds
Procedures to release of foreign exchange to the enterprises against exports made from the EPZs are
described in Chapter L3 (Section-V).

30. Sale of Bangladeshi goods to EPZ enterprises

Salesof Bangladeshi goods or raw materials to the enterprises in EPZ against payment in foreign
currency shall be treated as exports from Bangladesh and normal foreign exchange regulations
concerning declaration of exports on EXP forms and repatriation of proceeds is applicable to these
exports to the EPZ enterprises.

Exports to EPZ areas shall be considered asimports by EPZ enterprises. ln such cases, ADs of EPZ
enterprises may report such import transactions to Bangladesh Bank in monthly schedule E-2 under
Statement-1O or Statement-11 (as the case may be) mentioning the number of concerned EXP forms
to which the payment in foreign currency relate. This procedure of mentioning EXP numbers will also
be applicable for transactions between EPZ enterprises and intra EPZ enterprises. The above
procedure will be applicable for reporting in online web portal.

Usual IMP Form reporting procedures will, however, be applicable for imports by EPZ enterprises
from abroad.
31. Exports from EZs and private EPZs

The above instructions of Section-ll will be applicable for (i) enterprises of economic zones (EZs)
established under the Bangladesh Economic Zones Authority Act 2010 and (ii) private EPZs including
KEPZ established under Private Export Processing Zone Act, 1996.

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 Corporate Laws and Practices

CHAPTER 9: SECTION - |

FOREIGN INVESTMENT IN BANGI-ADESH

L. General

Foreign investors are free to make investment in Bangladesh in the industrial enterprises excepting a
few reserved sectors as mentioned in the 'lndustrial Policy' of the government in force. An industrial
venture may be set up in collaboration with local investors or may even be wholly owned by the
foreign investors. No permission of the Bangladesh Bank is needed to set up such ventures if the
entrepreneurs use their own funds. However, to avail of the facilities and institutional support
provided by the Government, entrepreneurs/sponsors may secure registration with Bangladesh
lnvestment Development Authority (BIDA). For investment in Export Processing Zones (EPZs) and
Economic Zones (EZs), such registration shall be done with the Bangladesh Export Processing Zones
Authority (BEPZA) and Bangladesh Economic Zones Authority (BEZA) respectively.

2. lssue of shares in favor of non-residents

A. Prior permission of the Bangladesh Bank is not required for issue of shares in favor of non-
residents against foreign investment in Bangladesh; general permission is accorded in this behalf
subject to the following conditions:

(a) The industrial venture will have permission from the Registrar of the Joint Stock Companies and
Firms (RJSCF)/The Bangladesh Securitles and Exchange Commission (BSEC) about its capital issue.

(b) Shares may be issued either against freely convertible foreign exchange brought in from abroad
through the banking channel or against import of capital machinery. Payment against such
import must be made from abroad. However, foreign exchange thus brought in must be
encashed in taka before issuance of shares except in the cases of Type A & Type B units of EPZs &
EZs wherein equity in FC brought from abroad may be retained in FC accounts of the units
concerned. ln the case of issuance of shares against capital machinery, the machinery have to be
cleared from the Bangladesh Customs first.

Beside, shares may be issued in favor of non-residents by debit to non-resident Taka accounts
maintained by ADs in the names of their overseas branches and correspondents against inward
remittance in convertible currencies. Hence ADs may issue certificate in support of payment from
such account for purchase of shares in Bangladeshi companies. ln the context of certificate issuance
to the beneficiary, ADs shall follow the format in Appendix 5/39 in case of payment from non-
resident Taka account and the format in Appendix 5l4O in case of payment against inward
remittance in foreign currency.

(c) Foreign Exchange lnvestment Department, Bangladesh Bank, Head Office must be informed
through the concerned AD about the issue of shares to non-residents pursuant to (a) &

(b) above with mentioning'Reporting Transaction lD'to the'Online Foreign Exchange Transaction
Monitoring System' of Bangladesh Bank, within 14 (fourteen) days of such issue, along with the
followi ng docu ments/pa pers:

(i) attested copy of the permission for the capital issue accorded by the RJSCF/BSEC;

3191t:*gi:
 Corporate Laws and Practices

(ii) attested copy of the registration, if any, of the foreign investment in the industrial ventures
accorded by the BIDA/BEPZAIBEZA;

(iii) copy of encashment certificate of foreign exchange in Taka authenticated by the AD in case
of issue of shares against foreign exchange received from abroad through the banking
channel or from non-resident Taka accounts (Appendix 5/39 or 5/40 as the case may be);
and

(iv) for issue of shares against foreign investment in the form of capital machinery, the
authenticated copy of bill of entry evidencing clearance of the capital machinery from the
Custom Authorities, copies of the related import perrnit, invoice, bill of lading/air way bill,
etc.

B. Transfer of Bangladeshi Shares/Securities

Transfer of Bangladeshi shares and securities from one shareholder to another irrespective of their
nationality/residency would not require Bangladesh Bank approval. No intimation to Bangladesh
Bank is required in case the transfer is effected between residents. However, for the transfer of
shares of private/public limited companies not listed in the stock exchanges, from resident to non-
resident, non-resident to resident and non-resident to non-resident, FEID, Bangladesh Bank, Head
Office should be informed, through the concerned AD within 1-4(fourteen) days, of such transfer
along with the following documents:

a) copy of encashment certificate, authenticated by the concerned AD, of foreign exchange in Taka
credited to the account of transferor in case of transfer of shares from resident to non-resident;

b) attested copy of the permission for the transfer accorded by the RJSCF/BSEC;

c) attested copy of up-to-date Schedule-X,

C. Temporary Non-resident Taka Account (NRTA) for Foreign lnvestors

ADs may open NRTA in the name of the proposed company/enterprise of foreign investors
contemplating to invest in Bangladesh without prior approval of Bangladesh Bank. Such accounts
may be credited with inward remittances received from abroad only. Upon
registration/commencement of the business, a new account in the name of the company may be
opened following usual procedure. However, account opened previously should be closed
immediately and balances lying therein shall be transferred to the new account. lf, for any reason,
the proposed investment/incorporation does not take place, the balance of the account after
meeting the required expenses, ffi?y be allowed to be repatriated without prior approval from
Bangladesh Bank. However, ADs shall report opening and closure of such accounts to FEID and FEOD,
Head office/concerned office of Bangladesh Bank immediately along with attested copy of form
'C'/TM form (as the cases may be) with particulars of transactions.

3. Remittance of sales proceeds of non-residents' investment (direct/portfolio) in Bangladesh

Guidelines for effecting remittance of sales proceeds of non-residents' investment in Bangladesh are
as under:

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 Corporute Laws and Practices

(A). Shares of the public limited companies listed with stock exchange(s)

Prior approval of Bangladesh Bank is not necessary for remitting the sales proceeds of securities held
by non-residents. ln such cases, repatriable amount must not exceed the market price of securities
prevailing in the stock exchange on the date of sales.

(B). Shares of the public limited companies not listed with stock exchange and private limited
companies

Prior approval of Bangladesh bank is required for repatriation of sales proceeds of non-residents
equity investment in the: (1) public limited companies that are not listed with the stock exchange
companies; and (2) private limited companies. There being no established market price for such
investment, Bangladesh Bank will accept fair value of the shares as on the date of sale based on
appropriate combination of three valuation approaches (viz. net asset value approach, market value
approach and discounted cash flow approach) depending on the nature of the company. Application
for repatriation of sale proceeds of shares shall be submitted to FEID at head office of Bangladesh
Bank with a Valuation Certificate of shares issued by a Merchant banker licensed by BSEC or a
Chartered Accountant experienced in company valuation. Appendix-6/3 of this

Guidelines provides indicative guidelines for arriving at fair value. The valuation certificates by
eligible valuers will have to be supported by full explanation justifying the fair value arrived at. Full
set of audited financial statements of the company will have to be submitted to Bangladesh

Bank along with application for remittance approval. lf not fully satisfied about appropriateness of
the valuation arrived at, Bangladesh Bank reserves the right to obtain second opinion from another
qualified valuer of its choice.
lf calculated fair value (accepted by Bangladesh Bank) exceeds the face value of the share of the
company concerned, capital gain derived therefrom may also be repatriated. However, only
accepted fair value shall be considered as repatriable/or for re-investment in Bangladesh. Prior
permission of Bangladesh Bank is not required for sales/transfer of shares of public limited
companies not listed with the stock exchange companies by one non-resident to another
non reside nt.

4. Portfolio investment by non-residents

Non-resident persons/institutions including non-resident Bangladesh nationals may buy Bangladeshi

shares and securities in Bangladesh against freely convertible foreign currency remitted from abroad
through the banking channel. Transactions relating to such investments including repatriation of
dividend/interest earnings and sale proceeds shall be made through a Non-resident lnvestor's Taka
Account (NITA) according to the procedure described in Section-lV, Para 24, Chapter L4. .

5. For the purpose of investment through Stock Exchange or in new public issue by non-residents,
securities will have the same meaning as defined in section 2(k) of the FER Act,1947.

6. After the shares/securities have been purchased by the non-resident investor, the related
certificates/scripts can be deposited/kept with any person/organization nominated by the investor.

The investor can as well take them outside the country, if he/she so desires.

32llllage
 Corporate Laws and Practices

SECT!ON - ll: OPERATIONS lN S ECURITIES

7. Definition of security

Section 2 of the FER Act, 1947 defines "security" either in physical or demat form,-

(i) shares, stocks, bonds, debenture stock and Government securities, as defined in the Securities
Act, 1920;

(ii) deposit receipts in respect of deposits of securities, units of mutual fund or collective investment
scheme, as defined in Securities and Exchange Commission (Mutual Fund) Rules, 2001; and

(iii) other instruments defined as security in the Securities and Exchange Ordinance, 1969 (Ordinance
No. XVll of 1969); but does not include bill of exchange or promissory notes other than
Government promissory notes. A "foreign security" is defined as a security issued elsewhere
than in Bangladesh and any security the principal of or interest on which is payable in any foreign
currency or elsewhere than in Bangladesh.

8. lmport and export of securities

There is no restriction under the FER Act, 1947 on the import of securities into Bangladesh. No
securities can however be exported or taken out of Bangladesh without general or special permission
of Bangladesh Bank. Residents in Bangladesh who are holders of foreign securities and who wish to
send the securities to banks, brokers or agents abroad for the purpose of sale, transfer etc. should
apply to the Bangladesh Bank through an AD for necessary export permit.

Permission for transfer of such securities will be granted provided the AD gives an undertaking that
the securities will be received back in Bangladesh within a specified period, or in the case of sale, the
foreign currency proceeds of the sale will be repatriated to Bangladesh. Bangladesh

Bank is also prepared to consider applications for the exchange of foreign shares and/or securities
held by residents of Bangladesh with Bangladesh shares and/or securities held by residents abroad.
Applications for this purpose should be made through an AD or Stock and

Share Broker. Such applications would be considered favorably provided the Bangladeshi
shares/securities desired to be imported from abroad are approximately of the same market value as
foreign shares and/or securities that are desired to be exported.

9. Transfer of securities to non-residents

ln terms of clause (b) of sub-section (1) of Section 1"3 of the FER Act, 1947 transfer of any security or
creation or transfer of any interest in a security to or in favor of a person resident outside
Bangladesh is prohibited except with the general or special permission of the

Bangladesh Bank. lt should be noted that this prohibition applies to transfer of

(i) all Bangladesh securities (i.e. securities expressed to be payable in Bangladesh currency or
registered in Bangladesh) whether held by person resident in or outside Bangladesh, and

322 lPagi:
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(ii) all foreign securities held by persons resident in Bangladesh. However, in the case of securities
registered in Bangladesh, Bangladesh Bank has accorded general permission for issuance and
transfer of shares/securities in favor of non-residents against foreign investments in freely
convertible foreign exchange or in the form of capital machinery (please see Para 2 of this
chapter for details). The prohibition imposed against transfer or creation of any interest in a
security to or in favor of a non-resident in terms of clause (b) of sub-section 13 of the FER Act,
1947 precludes the pledging or hypothecating of securities to or in favor of non-residents e.g. as
collateral or security for credit facilities abroad (please see Chapter 16, Section- l) or utilizing
them for forming trusts or settlements, of which a non-resident is the beneficiary.

10. Other provisions

(i) Clauses (c) and (d) of sub-section (l) of Section L3 of the FER Act, 1947 prohibit, respectively,
transfers of securities from registers in Bangladesh to registers outside Bangladesh and the
issuing, whether in Bangladesh or elsewhere of securities which are registered or to be
registered in Bangladesh, to persons resident outside Bangladesh except with the general or
specialpermission of the Bangladesh Bank.

(ii) For the purpose of Section L3 of the Act, "a person resident outside Bangladesh" or a "non-
resident" includes a foreign national for the time being resident in Bangladesh.

11. Holding/retention of foreign securities

Persons resident in Bangladesh who are or become owners of foreign securities are permitted to
hold or retain such securities provided they have acquired them in a manner not involving a breach
or violation of the foreign exchange regulations. Holders of foreign securities who wish to sell,
transfer or otherwise dispose of or deal in securities must, however, ensure that the proposed
transactions do not contravene the provisions of the FER Act, 1947 and the orders issued by the
Government of Bangladesh and/or the Bangladesh Bank thereunder and must obtain prior
permission of the Bangladesh Bank wherever necessary.

12. Submission of return by holders of foreign securities

Under the existing foreign exchange regulations all persons resident in Bangladesh who are or
become the owners of any security in respect of which the principal, interest or dividend is/are
payable in the currency of any foreign country or in respect of which the owner has the option to
acquire the payment of principal, interest or dividend in such currencies, are required to submit a
return to the Bangladesh Bank within one month of their acquiring the securities giving certain
particulars in respect of the said securities. The specimen of the return in which these particulars are
required to be furnished in duplicate is given in Appendix 5/41,. Citizens of Bangladesh having dual
nationality/persons usually residing outside Bangladesh/foreign nationals for the time being residing
in Bangladesh are not required to submit the said return.
 Corporate Lah,s und Practices

CHAPTER 10: COMMERCIAL REMITTANCES (OTHER THAN FOR IMPORTS)

L. Freight and passage collections

(i) Applications for remittances: Applications for remittances of freight and passage collections by
branches or agents of foreign airlines and shipping companies should be made to the ADs on

Form TM accompanied by a declaration in Form FP (See Appendix 5/42) along with the following:

(a) lmport/export freight manifest.

(b) Encashment certificate in support of inward remittances received from head office/principal
abroad.

(c) Authenticated copy of the charter party in case of vessel chartered by the principal of the
shipping agent in Bangladesh.

The statements mentioned in paras (v) and (vi) below should also accompany the applications.

(ii) Remittance of freight and passage: Remittances of freights and passages collected in Bangladesh
may be sent to owners abroad after adjustment of the amount spent for local disbursement and
taxes payable. Remittance of passage collections or use thereof for local disbursements are
permissible only after the relative journeys have actually been undertaken; collections should
not therefore be included in the remittance application or used for local disbursement unless the
journeys are undertaken.

(iii) Submission of periodical statement: All foreign airlines & shipping companies are required to
submit periodical statements of their disbursement and collection in the prescribed form
regardless of whether there is a remittable surplus. The statement is required even from those
airlines and shipping companies who bring in funds from abroad to meet their operating
expenses in Bangladesh, the amounts brought in from head office/principal abroad should be
reported in the FP statement.

(iv) Agency commission for handling vessels: Shipping Companies/Agents are required to charge
minimum agency commission for handling vessels at Bangladesh ports at the following rates:

a) Export Cargo-5(five) percent of net freight collections for cargoes booked by the agent
directly and 2.50(two and a half) percent against those booked by the principal.

b) lmport Cargo-2(two) percent of net freight collections

c) (1) lmport Cargoes in tramp/chartered vessel per port per call
Amount in USD
(a) lmport cargoes (dry)
(b) Tanker/liquid cargo
Weight including bulk/ homogeneous - up to DWAT (Dead
(Tons) mixed in tramp/ chartered Weight AllTold)
vessel up to DWAT(Dead
Weieht All Told)
Up to L0,000 1,000 1,000
Above 1-0,000 but not 2,000 2,000
exceeding 20,000
Above 20,000 2,500 1,500

324 1* a g,:
 Corporate Laws and Practices

(2) Minimum agency commission for tramp/chartered vessels in ballast calling at Bangladesh ports for
bunkering, victualling including landing of sick crew etc. per call per port ..... USD 750

(3) Owner's protecting/husbanding /supervising agent's minimum fees for tramp/ chartered vessel per
call per port............ ..... USD 750.

(v) Submission of statements by foreign airlines : Foreign airlines are required to submit the
following statements on monthly basis:

(a) Statement of freight/passage collection and disbursement in Bangladesh (See Appendix

s/43).
(b) Statement of passages sold/tickets issued by the Airlines (See Appendix5/44).
(c) Statement of cargo sold by the Airlines (See Appendix 5/a5)
(d) Disbursement statement (See Appendix 5/46) supported by cancellation/refund statement
(See Appendix5/a7).

(e) Details of credit bookings of passage and freight realized in cash during the month (See
Appendix s/48),
(f) Details of outstanding passage/freight bookings on credit (see Appendix5lail.

(vi) Submission of statements by shipping companies/agents : Shipping companies/agents operating

in Bangladesh are required to submit the following statements on quarterly basis :

(a) Statement of freight/passage collections in respect of foreign vessels and disbursements in

Bangladesh in Form Shipping I (See Appendix 5/50).

(b) Details of credit bookings of passage and freight realized in cash during the quarter in Form
Shipping ll (See Appendix 5/St).

(c) Details of outstanding passage and freight booking on credit in Form Shipping ill (See
Appendix 5/52).

d) Breakdown of disbursements in Form Shipping lV (See Appendix 5/53) supported by

statement of cancellations or refunds of freight/passages in Form Shipping V (See Appendix
s/s4).

(e) Statement of passages sold/tickets issued by the Shipping company (See Appendix 5/55).
The returns should be supported by export/import freight manifest and bill of lading. The breakdown
of disbursement must also be supported by third party bills/receipts where the amount involved in
any particular item of expenditure is Taka 2500 (Two thousand five hundred) or over. The returns
should be submitted within 60(sixty) days following the quarter to which the returns relate.

(vii) Collection of freight for transportation of excess baggage

Shipping/Airline Companies or Travel Agents may collect freight in Taka for transportation of
excess accompanied as well as unaccompanied baggage including motor car of Bangladesh
nationals from destination abroad to Bangladesh without prior permission of the Bangladesh
Bank.

1?5 li' r,:.

 Corporate Laws and Practices

(viii) Accepting freight in Taka by shipping companies/airlines Shipping Companies/Airlines while

accepting freight in Bangladesh Taka on exports and imports should be guided by the following
instructions:

(a) Freight on Exports: Freight on exports from Bangladesh in local currency shall be accepted
only when a certificate from the exporter's bank is produced to the Shipping
Companies/Airlines in the following form:

"Certified that EXP Form in respect shipment to be made by

of
M/s............. ( name of the exporter) has been stamped to the effect that the
documents in respect of the shipment under this EXP form shall be negotiated/accepted only
when these are drawn on CFR/CIF/CPT/CIP basis and not on FOB/ FCA /FAS/EXW basis.

Before issuing the above certificate, the ADs will invariably endorse the relative EXP form in
the
following manner:

"Certified that documents in respect of the shipment under this EXP form shall be
negotiated/accepted only when these are drawn on CFR/CIFICPT/CIP basis and not on
FO B/FCA/FAS/EXW basis.

While submitting the applications for remittances to the AD, the Shipping Companies will
nvariably submit therewith the aforesaid bank's certificate along with a copy of the relevant
bill of lading duly arranged according to the entries appearing on the freight manifest. ln
case of Airlines, Airway bill is to be submitted together with the certificate of the AD as
mentioned above.

However, licensed freight forwarders may pay freight charges to airlines/shipping companies
in Taka in respect of exports made on FOB basis subject to compliance with stipulations
mentioned in Section -lll, Chapter 17 of this Guidelines'

(b) Freight on lmports in Bangladesh Currency: Freight on imports on FOB basis against

LCAFs issued on CFR/CPT/CIF basis shall be accepted in Bangladesh in the local currency by
the shipping companies/airlines/freight forwarders provided a certificate from the AD as
mentioned in Appendix 5/1-3 is produced by the importer to the airline/shipping company
concerned. The AD should ensure that in the case of imports on FOB basis against LCAF
issued on CFR/CPT/CIF basis, a reasonable margin within the overall limit of the LCAF is
reserved to cover the amount of freight so that the overall total cost does not exceed the
amount of the LCAF. With a view to ensuring compliance with the above requirement, the
AD should endorse on the LCAF the amount of freight payable in Bangladesh currency as
stated in the bill of lading/airway bill and to issue a certificate in the form prescribed in
Appendix 5/L3for presentation to the shipping company/airline in Bangladesh at the time of
payment of freight In Bangladesh currency. Shipping companies/airlines are advised that
while accepting payment of freight in Bangladesh currency on such imports they should
invariably insist on production of the certificate from the ADs prescribed in Appendix 5/13
which should be enclosed with the freight manifest/return at the time of applying for
remittance of surplus freight collections. However, 'freight/transportation charge on FOB
basis import may be accepted in foreign currency also as per instructions mentioned below:

326lPage
 Corporate Laws and Pructices

(ix) Accepting freight on FOB imports in foreign currency by shipping companies/ airlines, eligible
freight forwarders

Shipping companies/airlines may accept freight charges on FOB imports in foreign currencies
from the importers/eligible licensed freight forwarders while importers' banks may at the
request of their importer clients make payments of freight charges in foreign exchange to
airlines/shipping companies/eligible licensed freight forwarders, out of the total value of the
LCAF issued for the import covering costs of goods and freight (Para 1"6, Chapter 7). The receipts
in foreign exchange shall be used through the foreign currency accounts maintained by shipping
companies/airlines/eligible licensed freight forwarders as mentioned in Para 33, Section-Vl
Chapter 13. However, payment of freight in FC shall be supported by certificate as per appendix
5/13 while crediting the FC account concerned which should be enclosed with the freight
manifest/return at the time of applying for remittance of surplus freight collections.

(x) Accepting freight on FOB exports in FC : Foreign exchange received by shipping companies,
airlines and multimodal transport operators licensed as freight forwarders by Customs
Authorities against handling of FOB export cargos from Bangladesh may be credited to FC
accounts as mentioned in Para 33, Section-Vl, Chapter 13. Shipping companies/ air lines may
accept freight charges on FOB exports in foreign currencies from the eligible licensed freight
forwarders also (Please see Section-lll, Chapter 17).

(xi) Transactions of freight forwarders

Besides the instructions mentioned in different paras of this chapter relevant to the operations
of freight forwarders, other instructions including maintaining FC account, receipts of freight in
FC and Bangladesh currency against handling of export/import cargo, outward remittance to
counterpart freight forwarders, reporting to Bangladesh Bank, etc. are enumerated in Section -
lll, Chapter L7.

2. Remittance of surplus earnings of foreign airlines, shipping companies, railway companies and
courier services companies

Apart from the periodical statements referred to in the foregoing paragraph, applications for
remittance of surplus earnings of foreign airlines and shipping companies (in form TM, with
declaration as per Appendix 5/9) submitted to the ADs should be accompanied by the following
documents:

(A) Airlines

(i) Dummy P Form duly filled in as per Appendix 5/56.

(ii) P-2 Form (where applicable) filled in as per Appendix 5/57.

(iii) Encashment Certificate as per Appendix 5/58, certificate of debit to convertible Taka account
as per Appendix 5/59 and certificate of debit to shipping agent's/ company's account as per
Appendix 5/60 as applicable, certificate of inward remittance against FOB export (Appendix
sle6).
(iv) Airway Bill in the case of excess baggage, export cargo etc. lf freight against export from
Bangladesh is accepted in local currency, certificate from Exporter's Bank as per para 1(viii)
(a) above;

327 l{'*,gt
 Corporate Laws und Practices

(v) ln the case of payment of freight in taka on import against LCAF, certificate from the
concerned ADs as per para 1 (viii)(b) above;
(vi) ln the case of issue of tickets against convertible Taka Accounts, letter of authorization from
the concerned account-holder as per para 11 (viXb) of Chapter 12.
Each form/supporting document will be submitted by the airline/ its GSA to the AD in duplicate.

Examination and Processing by Authorized Dealers

From the above mentioned documents the ADs shall satisfy themselves that the concerned
airlines have collected passenger fare/cargo freight as per routes and fares approved by the Civil
Aviation Authority of Bangladesh (CAAB). Moreover, the ADs have to satisfy themselves that the
provisions of this Chapter and Chapter 12(Travel) relating to issuance of tickets and collection of
freight have been duly complied with. All statements/returns/documents submitted
to the Bangladesh Bank must show the following at actual :

(a) fare realized from passengers

(b) freight against cargo
(c) number of passengers
(d) number of cargo challans
(e) expenses incurred under different heads

This is to mention here that only actual fare realized from passengers and actual freight realized
against cargo shall be considered to determine remittable surplus to abroad in compliance with
instructions stated in para 1(ii) of this chapter. lt would be necessary for the ADs to obtain
confirmation in writing from the certificate issuing ADs as to the genuineness of the encashment
certificates submitted by the airlines.

To ascertain the expenses of the airlines, the ADs shall examine the statements submitted by the
airlines in terms of para I (v) of this Chapter [Appendices 5/43-49]. Bills/vouchers issued by the
relevant authorities submitted by the airlines in support of the expenses shown in Appendix 5/46
should be examined and written explanation should be obtained in case of major omissions (e.g.
landing charge in case of on line carrier) in the statement. lf the explanation is not found satisfactory,
the matter should be brought to the notice of the Bangladesh Bank immediately.
While determining surplus earnings, the concerned ADs shall satisfy themselves that the agency
commission, overriding commission (in the case of issue of tickets and collection of freight by the
GSA) as per IATA rules, and taxes at the applicable rate have been deducted.
Taxes may not be deducted to the extent exempted by Bilateral Treaties providing for tax exemption
or where bank guarantees are furnished as per approval of the tax authorities. Airlines may pay taxes
out of funds earlier earmarked for tax on the basis of assessment made by the tax authorities or
from their current income. ln the latter case, the taxes paid should be shown as an item of
expenditure in the disbursement statement of the month in which the taxes have been paid. lf
expenditure in any month exceeds income, the deficit must be covered by inward remittance.

After determining the surplus earning as per relevant provisions of this Chapter and Chapter t2,the
AD will approve form TM and remit surplus earnings to the head office of the applicant airline.
Thereafter, within fifteen days of the following month of effecting remittance, the Ads shall submit

328lPag*
 Corporate Laws and Practices

to the Bangladesh Bank one set of all the relevant papers including copies of each form/document
and approved form TM for post facto examination.

(B) Shipping Companies

(i) Encashment certificate in support of remittance from abroad by head office/principal;

(ii) lmport/export freight manifests and bills of lading mentioned in the manifests;
(iii) ln the case of arrival in Bangladesh ports of vessel chartered by the foreign principal of
Bangladeshi shipping agent, attested copy of the relevant charter party; (iv) ln the case of
export cargo, statement regarding tax liability in prescribed form (Appendix 5/61) duly
signed by the taxation and customs authorities. The shipping company/its agent shall
prepare this statement in quadruplicate and submit it to the tax authorities. The concerned
Deputy Commissioner of Taxes will put his signature and seal on those and return three
copies to the concerned shipping company or his agent. The shipping company/agent will
submit those 3 (three) copies to the concerned office of the customs authorities who will put
their signatures and seal along with name and full address on those and return two copies to
the shipping company/agent who will submit these to the AD. The Authorized officer of the
AD will put his signature and seal mentioning name and address on both copies, retain one
copy and return the other to the shipping company/agent; (v) Forms as per para 1(vi) above
and declarations as per Para 1(viii)(a) and para 1(viii)(b) above;
(vi) Bill/voucher in support of expenses shown in Form Shipping tV (Appendix 5/53) for all
expenses of Tk. 2500 (Two thousand five hundred) or more per item. Each form, statement
and supporting bills/vouchers shall be submitted to the AD in duplicate.

Examination and Processing by Authorized Dealer

ln determining total income, freight received against export on CFR/ClF/CpT/Clp basis, freight
received against import on FOB basis and fund received by way of inward remittance from head
office/principal of local shipping agent are to be added. The surplus earning is to be determined
by deducting expenses shown in Form Shipping lV from the total income. Expenses relating to
port charges and custom charges as per disbursement statement (Form Shipping lV) are to be
checked with the bills issued by the concerned port authority. The ADs shall satisfy themselves
that freight brokerages have been reflected in Form Shipping lV.

ln the case of export of non-jute and non-traditional goods (including export of jute yarn and jute
carpet by private sector jute mills and jute carpet manufacturers) 0,50(half) percent of total
income is payable to Bangladesh Shippers' Council as freight brokerage on account of service
charge. This freight brokerage is also required to be shown in the disbursement statement as an
expense' The AD shall also ensure that agency fees and commission as per para 1 (iv) above have
been shown at serial no 8 of the Disbursement Statement. Taxes shown in Disbursement
Statement should be checked with particulars furnished for determination of tax liability as per
Appendix 5/61. Since income tax on account of Feeder Freight is not shown in the Appendix
referred to above, remittance of surplus earnings may be allowed only on receipt of supporting
document to the effect that income tax has been paid on this account. Any advance payment
made to the Master of the ship, payment towards bunker supply, expenses incurred in
connection with hotel bill or charter hire should also be shown separately in the Disbursement
Statement. For each item of expense amounting to Tk. 2500(two thousand five hundred) and
above, the relevant bills should be checked. ln each case of remittance of surplus earnings, the

329 11)*g*
 Corporate Laws and Practtces

ADs should obtain a certificate from the Shipping Company/Agent that all the expenses have
been shown in the disbursement statement, and that omission of any expense from the said
statement shall render the applicant liable for action against violation of Foreign Exchange
Regulations. The AD shall approve the form TM for the amount of surplus earnings found
in

order and after effecting remittance forward one full set of the papers along with approved
form
TM to the concerned area office of Bangladesh Bank within 15(fifteen) days of the following
month of such remittance for post facto examination'

(C) Courier Services

A foreign courier service company/its agent shall submit to the AD monthly statements for
the
purpose of remittance of surplus earnings to Head Office/Principal abroad. The monthly
statement, certified by a registered chartered accountant and its supporting documents should
contain information relating to each collection in Bangladesh against outward dispatcheses;
volume/weight of the documents/parcels dispatched, mode of dispatch, office abroad (with
name of city and country) through which documents/parcels have been delivered, amount of
commission and the amount payable to the principal on account of charges. The surplus earnings
shall be determined by deducting from gross collections (i) the local agent's commission for
handling inward and outward documents/parcels (ii) taxes payable on gross collections as
applicable and (iii) audit fees and other expenses. Remittance applications should also be
accompanied by invoices raised by head office/principal abroad for the claimed amount. As in
the case of remittance of surplus earnings of airlines and shipping companies, the application
and all other papers shall be submitted to the AD in duplicate.

After recording approval in form TM and effecting remittance, the AD shall forward one full set
of all papers including copy of approved form TM to the concerned area office of the Bangladesh
Bank for post-facto examination within 15(fifteen) days of the following month of effecting
remittance,

(D) Railway Companies: Remittance of surplus earnings of foreign railway company by local agent.

ADs may effect remittance of surplus earnings on behalf of local agents of foreign railway
companies to their principals abroad. Local agents operating with the authorization/license of
competent government bodies shall submit to the ADs monthly statements for the purpose of
remittance of surplus earnings to foreign principals. The monthly statement, certified by a
registered chartered accountant and its supporting documents should contain information
relating to each collection in Bangladesh against sales of ticket, amount of commission and the
amount payable to the principal abroad. The surplus earnings shall be determined by deducting
from gross collections (i) the local agent's commission (ii) taxes payable on gross collections as
applicable and (iii) audit fees and other expenses. Remittance applications should also be
accompanied by invoices raised by principal abroad for the claimed amount, After recoding
approval in form TM and effecting remittance, the AD shall forward one full set of all relevant
papers to FEOD, Bangladesh Bank, Head Office, Dhaka for post-facto examination within 15 days
of the following month of effecting remittance. ln addition to this, AD shall report the
transactions to FEOD, Bangladesh Bank, Head Office/the concerned area office of Bangladesh

Bank in the monthly returns/statements

3301i1 agc
 Corporate Laws and Practices

3. Operating in Bangladesh as agents of non-residents or branch/liaison/representative offices etc.

Before taking up for processing a remittance application, the AD shall check whether the concerned
agent/office of the airline, shipping company, courier service company, freight forwarders, stock
brokerage firms, satellite channel distributors, railway company, etc. are operating in Bangladesh
with permission from competent government authorities, as applicable as mentioned in Sections l, ll
and lll of Chapter 17.

4. Undertakings for adjustment/repatriation of excess amount

ln all cases of remittances of surplus earnings, undertakings shall be obtained from the applicants to
the effect that in the event of detection, on post facto scrutiny, of any excess remittance, the excess
amount will be repatriated/adjusted from subsequent remittable amount.

5. Submission of monthly return to Bangladesh Bank

All the above mentioned remittances shall be reported in the usual monthly returns submitted by
the ADs to the Bangladesh Bank. Besides, all receipt and payment transactions through foreign
currency accounts shall have to be included in the monthly collection and disbursement statements
routinely submitted to Bangladesh Bank by shipping companies/airlines through their AD banks. ln
this context, collection in foreign currency should be presented in a separate column of relevant
statements (Appendix-5 1 42, 5 1 43, 5 1 44, 5 / 45, 5 / 46, S / 48, S / 49, S /50, 5 / 51,,
5 / 52, 5 I 53, 5 / 54, 5 I 62, 5 / 63, 5 / 65, 5 I 66, 5 / 67),

6.
(i) Operating expenses of Bangladesh Shipping Corporation and Bangladesh Biman

Bangladesh Shipping Corporation and Bangladesh Biman are allowed to make remittances to
meet bonafide disbursements in foreign ports/foreign stations without prior approval of the
Bangladesh Bank.

(ii) Submission of Statement Bangladesh Shipping Corporation Bangladesh Shipping Corporation is

required to submit the following periodical statements/returns in regard to their foreign
operations:
(a) Consolidated quarterly statement showing income and expenditure in respect of foreign
shipping agents as per Appendix 5/62.
(b) Consolidated quarterly statement showing income and expenditure in foreign exchange by
foreign agents as per Appendix 5/63.
(c) Consolidated quarterly statement showing balances held abroad with banks, main agents and
other credit agencies as per Appendix 5/64.
(d) A copy of the monthly report of cash foreign exchange earnings and expenditure submitted
to Ministry of Finance.
Returns as at (a) to (c) above should reach Bangladesh Bank, Head Office, Dhaka within two months
following the quarter to which returns relate and returns at (d) above by 20th of the following
month.

(iii) Submission of Statement Bangladesh Biman

Bangladesh Biman is required to submit a consolidated monthly statement of foreign exchange

earnings and expenditure as per Appendix 5/65.

331 ll];rg*
 Corporute Laws and Practices

7. Statements/returns to be submitted by Private Shipping Companies

All prlvate shipping companies in Bangladesh are required to submit the following quarterly
statements/returns:
(a) Statement of earnings and expenditure in Bangladesh in respect of vessels owned by private
shipping companies as per Appendix 5/66.
(b) Statement showing earnings and expenditure of foreign agents of Bangladeshi shipping
companies as per Appendix 5/67.
(c) Consolidated statement of earnings, disbursements and net amount repatriated to Bangladesh as
per Appendix 5/68.
(d) Statement showing debits and credits to foreign currency account maintained by shipping
companies with banks abroad as per Appendix 5/69.

The statements should reach FEOD, Bangladesh Bank, Head Office, Dhaka or concerned area office of
Bangladesh Bank within two months following the quarter to which those relate.

8. Charter of Foreign Aircraft

Persons or firms holding permission of the appropriate ministry of the Government to charter non-
resident-owned aircraft may apply for remittance approval of Bangladesh Bank in form TM along
with the permission letter of the Govt. The application should be accompanied by a copy of the
charter agreement together with an undertaking that a detailed account of all disbursements made
for the account of the owners will be submitted to Bangladesh Bank within 15(fifteen) days of the
expiry of the period of the agreement.
lf the application is approved, a permit will be issued to cover any advance payments required under
the terms of the Charter but the remittance of the total amount agreed upon will not normally be
sanctioned until the final accounting of disbursements etc. is made available to the Bangladesh Bank.

9. Charter of foreign ships

Persons or firms resident in Bangladesh intending to remit foreign exchange in favor of nonresident
owners of ships on account of charter hire shall apply to the ADs.

The documents to be furnished along with the application are

(i) Form TM duly filled in;

(ii) Permission from the Ministry of Shipping/Directorate General of Ports and Shipping for charter
of the concerned non-resident owned ship;
(iii) Waiver certificate from the D.G., Ports & Shipping;
(iv) Contract(Charter party/Agreement) between the ship owner and the charterer;
(v) Contract between the exporter and the charterer (where the exporter is not the charterer
himself);
(vi) Freight prepaid bill of lading;
(vii) Bank certificate in support of CPT/CFR/ClF/ClP export as per proforma prescribed vide para 1
(viii)(a) above;
(viii) Freight /cargo manifest issued by the Shipping Agent;
(ix) Mate's receipt issued by the Captain/Master of the concerned ship;
 Corporate Luws and Practices

lf the above documents are found in order, the total quantity of goods shipped shall be determined
from the concerned bills of lading, cargo/freight manifest and Mate's receipt. Thereafter, the total
freight shall be determined by applying the rate of freight mentioned in the charter party
(agreement concluded between the ship-owner and the charterer) to the aforesaid quantity of
goods. To be certain that the goods shipped have been exported on CFR/CPT/CIF/ClP basis, it would
be necessary to examine certificates issued by the concerned banks. Net charter freight is required
to be determined by deducting freight tax at prescribed rate, freight brokerage, port dues etc. and
other local expenses relating to the chartered ship from the total freight. ln the event of remittance
of foreign exchange by the concerned non-resident ship owner for the purpose of sald local
expenses, net remittable charter freight shall be determined by adjustment of the amount so
remitted from abroad. After determination of net charter hire on the basis of the above proceCure,
the AD shall approve the form TM and effect remittance to the non-resident owner. Before allowing
remittance of charter hire, the AD shall obtain from the charterer an undertaking that the charterer
shall submit to the AD the final lncome-Expenditure Statement along with required documentary
evidences within one month from the date of remittance of charter hire.

Further, an undertaking is to be obtained from the charterer to the effect that if on subsequent
scrutiny the remittance is seen to be in excess of amount actually payable, the excess amount will be
repatriated through normal banking channel.

10. ln case the charterer is a private Bangladeshi shipping company, the AD, before effecting remittance,
shall satisfy itself that the concerned shipping company has no surplus earnings abroad or the
surplus earnings kept abroad is not sufficient to meet the concerned charter hire.

11. lncome-Expenditure statement of the chartered foreign ship company

The charterer shall submit to the concerned AD a final lncome- Expenditure Statement relating to
the charter along with documentary evidences within one month from the date of approval of the
remittance. Each of the above documents/statements and related papers shall be obtained in
duplicate and one set of the same along with approved form TM shall be sent by the AD to the
relevant area office of the Bangladesh Bank, for post-facto examination.

12. lmport through chartered ship : payment of freight charges to ship-owner abroad

To effect payment of freight charges to foreign ship-owners for ships chartered by the importers in
Bangladesh, ADs shall have to observe the following conditions to remit such charges :

(a) the relevant Bill of Entry has been submitted as proof that the goods have been arrived in the
country;
(b) the ADs should satisfy themselves that the unit value of the imported goods including freight is
competitive with the value of such goods imported on CFR basis in the respective period;
(c) lmport Policy Order in force has been meticulously complied with ;

(d) authorization from the Directorate of Shipping has been obtained (if general waiver has not been
accorded);
(e) Form TM is duly filled in.

1tt lt ! {i,-
 Corporate Laws and Practices

13. Remittances against export claims

The ADs may remit export claims not exceeding 10(ten) percent of the repatriated export proceeds
on the following counts:
(a) Short weight claim;
(b) Quality claim;
(c) Part shipment.

ln these cases the exporters will be required to apply to the AD in the form given in Appendix 5/70.
The forms TM in these cases shall be approved by the concerned ADs. Genuineness of the claim
should in these cases be established by examination of the following documents:
(a) Short-weight Claim
(L) Proceeds Realization Certificate (PRC);

(2) Debit Note from the buyer;

(3) Weighment Certificate/Note from a recognised weighing body;
(4) LMD Certificate (for shipping weight basis shipment) in the case of raw jute.

(b) Qualitv claim

(1) PRC;
(2) Debit Note from the buyer;
(3) Test Report from a recognised test house or an Arbitration Certificate from an approved
body of arbitrators.
(c) Part Shipment
(1) PRC;
(2) Debit Note from the buyer;
(3) Contract in original;
(4) Arbitration award from a recognised arbitrator as referred to in the contract.
14. ln the following cases the ADs may effect remittances in settlement of commercial claims in respect
of exports without prior approval of the Bangladesh Bank:
(i) Claims on export of jute goods by mills controlled by the Bangladesh Jute Mills Corporation

(BJMC) provided:

(a) The remittance application of the mill concerned is supported by a genuineness certificate
about the claims issued by the BJMC.
(b) The proceeds realization certificate is submitted along with the application.

(ii) While receiving application from the exporter for approval of remittance on account of quality
claim against export of raw jute and jute goods, No Objection Certificate/ recommendation
issued by the Directorate of lnspection of Jute and Jute goods should be asked for along with
other prescribed documents. No remittance application against quality claim on export of raw
jute and jute goods should be considered without this No Objection
Certificate/recommendation.

334 1F;rg*
 Corporute Laws and Prqctices

15. The ADs will submit to the FEOD, Head office or other offices of Bangladesh Bank all the documents
under various types of export claims as mentioned in Paras 13 & L4 above for post facto
examination, within 15 days from the date of remittance.
16' Applications (Appendix 5170) from exporters for export claim remittance of more than 10(ten)
percent of repatriated export proceeds, supported by documents mentioned in para 13 above,
should be forwarded to the Bangladesh Bank along with form TM for prior approval. Such
applications for remittance against other types of claim settlements on exports should also be
forwarded similarly to Bangladesh Bank for prior approval, duly supported by the relevant
documents as listed below:
(i) AmicableSettlement
(a) PRC.

(b) Debit Note from the buyer.

(c) certificate from the chamber of commerce in the country of import.
(d) Correspondence in original exchanged between the shipper and the buyer. Original cables
should be produced if cable charges are included in the Debit Note.
(ii) Commission
(a) PRC.
(b) Debit Note.
(c) Agreement regarding the payment of commission.
(iii) Cancellation of the contract
(a) Debit Note.
(b) Contract.
(c) Correspondence in original passed between buyer and shipper.
(d) Arbitration Certificate, or Chamber of Commerce's Certificate for claims settled amicably.
(iv) Freight against exports:
(a) PRC

(b) Debit Note.

(c) Contract.
(d) Bill of Lading.
(v) lnspection fee, arbitration fee, survey and analysis fee etc.

(a) PRC.

(b) Debit Note from the institution claiming fees.

(c) Report from the above institution in support of the claim.
(vi) Miscellaneous claims like refund of export duty
(a) PRC
(b) Debit Note.
(c) Contract.
(d) Correspondence.
 Corporate Laws und Practices

j.7. ln addition to the export claims mentioned above, remittance on account of the undermentioned
claims in respect of raw jute are also allowed subject to fulfillment of documentation prescribed for
each type of claims.
(i) lnvoice back and Resale
(Remittance is allowed after resale of the goods is completed. Resale price is adjusted from invoiced
back claim).

(a) Original arbitration award (including appeal award, if any)'

(b) Documentary evidence to show that:
(i) Shipper had advised the Bangladesh Bank about buyer's exercising the option of invoicing back
the parcel.
(ii) prior permission from the Bangladesh Bank was obtained for resale of the invoiced back goods.
(c) Receipts, bills, vouchers etc. in support of miscellaneous charges included in the claim.
(d) Account sale or resale note.
(e) Resale Contract [(For resale, maximum commission is 1(one) percent and no commission is

allowed if the goods are resold to the same party who has invoiced back the parcel)1.
(ii) Default
(a) Original Contract.
(b) Correspondence in original exchanged between the shipper and the buyer regarding non-
shipment.
(c) Original arbitration award or amicable settlement certificate.
(d) Documentary evidence in support of market difference of claims. (e) Shipper's explanation
for non-fulfillment of the contract.
(iii) Moisture claim
(a) PRC (b) Debit Note.
(c) Original contract.
(d) Original arbitration award or test report or analysis report.
(iv) Late shipment penalty

(a) Original contract.

(b) Copy of bill of lading.
(c) Shipper's explanation showing reasons for late shipment'
(d) BJA's letter declining to issue unavoidable delay certificate.
(v) Difference for payment received at sight instead of after sight (usance) basis
(a) Original contract.
(b) Correspondence showing at whose instance the payment was made at sight.
(c) Banker's confirmation that the proceeds were realized at sight showing the date of
realization and particulars of returns in which the transaction was reported.
(d) The basis on which the difference is claimed and evidence in support thereof.

336 1tr'*g*
 Corporate Luws and Pructices

(vi) Freight rebate (or difference in rebate)

(a) Original Contract.
(b) Copy of Bill of Lading.

(c) Shipping company's certificate of payment (if freight paid abroad and rebate paid in
Bangladesh).

(vii) Refund against overpricing

(a) Original contract.
(b) Correspondence exchanged between buyer and seller in this regard.

18. Discount claims for shipment of readymade garments

All cases of discounts claimed by the importers on account of discrepancies in documents, short
shipment, late shipment, conservative arrest, quality issue etc. in respect of shipment of readymade
garments should be submitted (as per prescribed format shown in Appendix 5/71.)to the Discount
Committee through FEPD, Bangladesh Bank, Head Office for recommendation/ decision. However,
before referring such case to the Committee, AD must be satisfied about the genuineness and merit
of the case.

19. For any other type of export claims not covered above, the exporter's application should be
forwarded by the AD to Bangladesh Bank with full information and supporting documents.
20. ADs should furnish monthly statements of export claim remittances (as per Appendix Sl72),
mentioning remittances allowed by themselves during a month under general authority given to
them as well as those allowed with prior Bangladesh Bank approval, by the 7th day of the following
month.
21. Claim settlement under marine insurance policies
For remittances on account of settlement of claims arising under Marine lnsurance Policies, the ADs
are required to submit the following documents to the Bangladesh Bank with Form TM duly filled in
along with a declaration as per Appendix 5173 f or approval:

Marine Policies
(i) Shippers' invoices relating to shipment against which claim is made.
(ii) PRC

(iii) Bill of Lading.

(iv) Claim Note.
(v) Original lnsurance Policy/Certificate.
(vi) Survey Report.
(vii) Short Contents Certificate from the Customs Authorities of the country of import in case claim is
made for short delivery of goods.

22. General Average Payment

There is a General Average Act when an extraordinary sacrifice or expenditure is intentionally and
reasonably made or incurred for the common safety for the purpose of preserving from peril the
property involved in a common maritime adventure. To protect a ship and a major portion of its cargo
from peril, the captain may declare General Average. To determine losses arising from General
Average Act the captain then appoints an Adjuster. The General Average Adjuster sends report to the

337lFag*
 Corporate Laws and Practices

concerned parties stating therein the amount of loss, the share of each in the loss and the destination
to which the share is to be remitted. ln this context the insurance companies may apply to the AD for
remittance abroad of the amount representing the shares of consignees insured by them, with the
following document :

(i) Final Report of the General Average Adjuster

(ii) Marine Cargo PolicY
(iii) Copy of Letter of Credit (LC)/contract
(iv) Bill of Lading
(v) lnvoice
(vi) Average guarantee
(vii) Form TM and declaration as per Appendix 5/73
(viii) Declaration from Shadaharan Bima Corporation along with the list showing names of the
insurance companies concerned with the General Average.

Before allowing remittance the ADs shall satisfy themselves that the names of the company mentioned
price
in the Marine policy, of the ship, of the consignor and the consignee, the quantity of goods and
mentioned in the invoice, bill of lading no. and the quantity of goods mentioned therein, the quantity of
goods and value mentioned in the LCs/contract the quantity of goods and value mentioned in the
Average Guarantee etc. are consistent with the details contained in the General Average Adjuster's
report. lf all the documents and papers are found in order, the Ads may approve form TM and effect
remittance on account of the General Average contribution applied for. All the papers and documents
are to be preserved for eventual post facto checking by inspection team of Bangladesh Bank.

23. Employment of overseas agents etc.

prior permission of the Bangladesh Bank is required by persons or firms in Bangladesh who wish to
employ the services of agents abroad, whether on regular or intermittent basis.

Applications for this purpose should be made by letter giving full details of the nature and value of
the business transacted in the past by the applicant, the existing arrangements and the nature of the
proposed arrangements to be made with the overseas agents and where approved, applications for
remittances should be made on form TM quoting reference of the approval of the facility by the
Bangladesh Bank.

24. Opening of branches or subsidiary companies abroad

prior approval of Bangladesh Bank is not required by the residents in Bangladesh for opening of
offices/subsidiary companies abroad. They are however required to report the same to Bangladesh
Bank within one month of opening of such offices, as per Appendix 5/74. Companies/firms shall,
through ADs, regularly submit to FEID, Bangladesh Bank, Head Office periodical statements of
accounts of these offices/subsidiary companies abroad; any net surplus of earning over routine
current expenses/net profit of such offices are to be promptly repatriated to Bangladesh. Remittance
of up to USD 30,000(thirty thousand) or equivalent may be made annually to meet current expenses
of such offices opened abroad by a commercial or industrial concern. Such remittance may only be
made in the names of concerned offices/subsidiary companies abroad.

338 lPagi:
 Corporute Laws and Practices

The ADs shall examine following papers before effecting remittances:

(1) approval letter of the competent authority of the country concerned for opening the office in
that country
(2) lease agreement relating to the premises.

The AD shall satisfy itself about the actual necessity of remitting funds by examining the actual
andlor estimated incomes and expenses of the office/subsidiary company abroad as revealed from
its audited accounts and the other papers; and remit funds to the extent found necessary, subject to
the prescribed ceiling. Before effecting remittances for subsequent years the ADs shall verify the
renewed lease agreement (if applicable) and other related vouchers.

25. Application of Bangladesh lnvestment Development Authority Act, 2016 for payment of royalty,
fees for technical knowledge or technical assistance and franchise fees to foreign persons or
institutes.

Section 1-8 of Bangladesh lnvestment Development Authority (BIDA) Acl,201,6 requires approved
industrial enterprises to make applications to the Authority for payment of royalty, fees for technical
knowledge or technical assistance and franchise fees to foreign persons or institutes in accordance
with the prescribed manner as defined by BIDA. Accordingly, private sector industrial enterprises as
defined in Section 15(3) of the Act shall have approval from BIDA for such remittances.

25. Outward remittances on account of payment of royalty, fees for technical knowledge or technical
assistance and franchise fees.

On receipt of applications together with approval from BIDA, following instructions shall be observed
by ADs before execution of remittances:

(a) ADs shall be ensured that they are nominated for the remittances as per approval letter issued
by BIDA;
(b) ADs shall be satisfied that applicable taxes payable on remittable amounts have duly been
deducted and paid;
(c) ADs shall satisfy themselves about the genuineness of the relevant documents. They will
immediately contact with BIDA in case of any doubt.
(d) As usual, ADs shall preserve customer-wise documents for eventual examination by

Bangladesh Bank inspection team and shall report the transactions to Bangladesh Bank.

27. Remittance of cost of training and consultancy services

lndustrial enterprises producing for local markets and service sector industries may remit through
their nominated ADs up to 1(one) percent of annual sales as declared in their previous year's income
tax return towards costs of training and consultancy services as per relevant contract with the
foreign trainer/consultant, and prior approval of Bangladesh Bank will not be required for such
remittances. ln this connection industrial enterprises will mean firms and companies engaged in
manufacturing or processing or assembling and service sector industries will mean the industries
within the purview of lndustrial Policy in force.

1lq lii,,,,
 Corporute Luws and Practices

28. Remittance of profit of branches of foreign firms other than financial institutions

ADs may without prior Bangladesh Bank approval remit abroad the profits of branches of foreign
firms and companies. The foreign firm/company operating in Bangladesh should for this purpose
submit application to its nominated AD duly supported by the following documents/information:

(A) Submission of Documents

(i) Audited Balance Sheet and Profit and Loss Account for business done in Bangladesh for the
relevant period.
(ii) Consolidated audited Balance Sheet and Profit and Loss Account of the company/firm (head
office) for the corresponding period.
(iii) Year-wise reconciliation of head office accounts for the period for which profit remittance is
applied for.
(iv) Documents regarding payment of taxes in Bangladesh:

(a) A certificate from the Auditors in Bangladesh that tax provision made in the accounts for
the period in question is sufficient to meet all tax liabilities in Bangladesh; or,
(b) Copies of final assessment orders and forms in respect of all taxes for the period duly
certified and stamped by the department concerned.

(v) Full particulars about additions to fixed assets of the company in Bangladesh, if any, during
the period and source of funds for financing such additions'
(vi) Particulars of outstanding borrowings in Bangladesh of the company/firm.
(vii)Permission letter of the relevant Government Authorities for carrying on business in
Bangladesh and the terms and conditions thereof.

(B) Examination of Documents

The ADs, shall examine and process the applications for profit remittance as follows:

(i) All past losses should be adjusted either to profit and loss account or general reserve
account.
(ii) Additions to fixed assets, furniture and fixture, office equipment, cars etc. will be deducted
from net profit before arriving at the remittable profit. lf the additions are financed out of
depreciation, disposals during the year andlor non-repatriable funds received from abroad,
no deduction for these will be made from the profit.
(iii) Profit on sale of small fixed assets items like furniture, fixture and equipment and profit on
sale of investments in stocks, shares, bonds, securities etc. may be treated as admissible
items of remittable Profit.
(iv) The entire amount of the profit on sale of fixed assets acquired for running the normal
business activities of the concern as well as profit on sale of investments in share, securities
etc. acquired out of undistributed remittable profit will also be treated as remittable.
(v) profit on sale of immovable properties such as land, building, etc. shall be deducted from
remittable profit unless prior permission of Bangladesh Bank has been obtained on
application along with (a) Auditor's certificate about current market value of the immovable

340lFag*
 Corporate Laws und Practices

property sold (b) balance sheet and other papers of the relevant period establishing the
book value of the property on the date of sale (c) copy of agreement of sale certified by the
Auditor (d) papers regarding tax assessment/tax payment on the capital gains from the sale.
(vi) Net amount of cash subsidy, if any, granted by the Govt. shall be deducted from profit.

(c) Remittance of profits of Sterling Tea Estate Companies

Further to the requirements of sub-paras (A) and (B) above, applications for remittance of profits
of Sterling Tea Estate Companies should fulfill the following:

(i) The companies will prepare accounts in Taka and apply for remittance in Taka

(ii) The Auditors should certify that the computation of remittable profit and the entire income
for the year has been earned on business Authorized by the Memorandum and Articles of
Association of the company and accrued in Bangladesh and that all losses and revenue
liabilities have been adjusted before arriving at the remittable profit. The Auditors must also
certify that in their opinion the accompanying financial statements present fairly the
financial position of the company as of date and the results of its operations and changes in
financial position for the year ended, are in conformity with the generally accepted
accounting principles applied on a business consistent with that of the preceding year and
the deviations, if any, have been reported.

(iii) Certified copies of assessment orders and evidence of payment of all income and other taxes
or a certificate from the Auditors of the company that adequate provision has been made to
meet all tax liabilities in Bangladesh, both for the previous years as well as current year
together with the calculation sheet duly certified by the Auditors showing how the tax
provision figure has been arrived at, should be produced.

(D) The firm/company will keep the Foreign Exchange lnvestment Department, Bangladesh Bank,
Head Office informed beforehand about its nomination of AD and about any subsequent change
in such nomination. The AD shall determine the Taka amount of the remittable profit after
examining the remittance application in terms of sub-paras (B) and (C) above and effect
remittance of equivalent foreign exchange. After making the remittance the AD shall forward the
remittance application and supporting papers/documents in original to the Foreign Exchange
lnvestment Department, Bangladesh Bank for post facto checking within one month of effecting
remittance. Another copy of the remittance application along with the approved form TM shall
be forwarded, to the concerned area office of the Bangladesh Bank with the monthly returns of
the AD.

29. Remittance of profit of banks, insurance companies and other financial institutions

Foreign banks and financial institutions operating in Bangladesh may remit profits to their head
offices abroad through their nominated ADs without prior Bangladesh Bank approval. Foreign
insurance companies operating in Bangladesh may likewise remit the shareholders' portion of profits
through their nominated ADs without prior Bangladesh Bank approval. The basis for computation of
remittable profit and the documents on which the calculations should be based shall be as follows :

341 lf*gr.:
 Corporate Laws and Practices

(A) Documents

(a) Audited Balance Sheet and Profit & Loss Account in respect of operation of the foreign
bank/insurance company/financial institution in Bangladesh for the relevant year;

b) (i) Copies of final assessment orders and forms in respect of all taxes for the period duly
certified and stamped by the taxation authority or (ii) certificate from the Auditors in
Bangladesh that tax provision made in the accounts for the period is sufficient to meet all tax
lia bilities;

c) Certificate authenticated by the Auditor showing particulars of additions to fixed assets in

Bangladesh, if any, during the period along with the amount of depreciation made, sale
proceeds of fixed assets disposed of, and the amount of non-repatriable funds received from
abroad to finance capital expenditure during the period;

d) Auditor's certificate with regard to the income accrued and shown in the books of accounts
but not actually realized on the date of remittance;

e) ln case of insurance companies, Actuary's valuation report relating to the period for which
remittance is to be sent, and approval letter from lnsurance Development and Regulatory
Authority (IDRA) regarding remittance of shareholders' portion of profits for the period;

f) Auditor's certificates regarding adequacy of (i) capital and reserves and (ii) provisioning
against classified loans, advances and other assets required in terms of applicable laws and
regulations; mentioning clearly both the required and the actual levels of capital, reserves
and provisions;

g) An undertaking from the applicant foreign bank/insurance company/ financial institution

that any amount determined by Bangladesh Bank as having been remitted in excess of the
amount actually remittable shall be repatriated immediately on demand.

(B) Computation of remittable profit

Upon being satisfied about the consistency of the amount applied for remittance with the facts
and figures in the documents listed above, profits as per audited accounts may be remitted after
making necessary deductions on the following counts:

a) Tax: Tax assessed by the taxation authority or in the event assessment is not completed on
the date of remittance, the amount of tax as provided for in the books of accounts and
certified by the auditors as adequate in accordance with the tax laws;

b) Additions to fixed assets: Costs of fixed assets, furniture and fixtures, office equipment, cars
etc. acquired/bought during the year minus cost of assets financed out of depreciation, sale
proceeds of assets and those bought with non-repatriable funds from abroad as shown in
the Auditor's certificate referred to in para 29(AXc) above;

c) Profits on sale of immovable assets: Any amount of profit in excess of Tk. 10,000 (Ten
thousand) arising out of sale of immovable assets (land, building etc.) included in the profit;

342 | t! 'a g;:

 Corporate Laws and Practices

d) lncome receivable: Any unrealized interest income on adversely classified assets wrongly
credited to income statement.

e) lrregular income: Excess amount of interest and commission/charges etc. realized and
included in the Profit & Loss Account as detected by the Bangladesh Bank inspection teams ;

f) Shortfalls in capital & in provision requirements: Any shortfall in capital & reserves in
Bangladesh and any shortfall in maintenance of provisions against classified loans, advances
and other assets as required in terms of laws and regulations by Bangladesh Bank/other
relevant regulatory authorities from time to time;

C) Past accumulated losses: All accumulated previous losses.

30. Submission of documents to Bangladesh Bank for post facto checking

Attested copies of all papers/documents related to remittance of profits of foreign banks, financial
institutions and insurance companies are to be forwarded to the Foreign Exchange lnvestment
Department, Bangladesh Bank, Head Office, Dhaka by the AD, within one month of remittance, for
post facto checking; retaining the originals in their records for inspection by Bangladesh Bank
officials. Any sum remitted in excess (as may be determined by the Bangladesh Bank during post
facto checking) shall have to be repatriated immediately.

31. (a) Remittance of dividend to non-resident shareholders

The ADs are allowed to remit dividends (both final and interim) to the non-resident shareholders on
receipt of the application in the prescribed form (Appendix 5/75) in triplicate from the companies
concerned duly certified by their Auditors and supported by the following documents:

(i) Attested copy of the certificate of incorporation of the company (to be submitted only once).
(ii) Audited Balance Sheet and Profit & Loss Account of the Company for the year to which the
dividend relates.
(iii) Copy, certified by the Auditor, of the Board resolution declaring the dividend.
(iv) List of non-resident shareholders to whom dividend is payable.

(v) Certificate from the Auditor of the company to the effect that the taxes payable by the
nonresident shareholder on account of the dividend earned has been deducted. (vi) Auditor's
certificate to the effect that the provision for income tax and/or any additional liability (such as
surcharge etc.) in connection with such taxes made in the accounts of the company is sufficient
to meet all past and present tax liabilities of the company in Bangladesh up to the period for
which remittance of dividend is applied for i.e. the provision should cover not only current year
but also the previous years for which taxes have not yet been finally assessed and paid.
(vii) Final income tax assessment order as and when obtained.
(viii)Before allowing remittance the ADs should ensure that the applicant has given undertaking to
the effect that in case of remittance of any ineligible amount, the amount so remitted will be
repatriated to Bangladesh on demand by Bangladesh Bank/the AD.

343 1t';rg*
 Corporate Laws and Pructices

(b) Each company will apply for dividend remittances through one nominated AD whose name
should be communicated beforehand to the Foreign Exchange lnvestment Department,
Bangladesh Bank, Head Office, Dhaka. Any change in the nominated AD bank should likewise be
notified to the Bangladesh Bank well in advance.

(c) While allowing remittance of dividend the ADs should satisfy themselves that profit shown in the
Balance Sheet and Profit & Loss Account has arisen out of the normal trading/business activities
of the company or out of past accumulated reserves which were remittable. ln arriving at the
profit out of which dividend has been declared and applied for remittance, ADs should in
particular verify to ensure that all previous losses/tax liabilities, if any, have been fully adjusted
against current year's net profit or against general/revenue reserve. Also, any cash subsidy
granted by Govt. to the company should be deducted from profit in arriving at the divisible
profit, unless allowed otherwise by the Bangladesh Bank.

(d) Remittance of dividend should be approved in Taka first and be effected after converting the
Taka into equivalent foreign exchange at the rate ruling on the date of remittance.

(e) Within one month of effecting remittance of dividend, one full set of the application, audited
annual Balance Sheet and Profit and Loss Account and all other papers shall be forwarded by the
AD to FEID, Bangladesh Bank, Head Office, Dhaka for post facto checking. Another copy of the
application form shall be attached to the usual monthly returns to the concerned office of
Bangladesh Bank. Third copy of the application form and copies of other papers should be
retained by the AD for its record.

(f) The ADs will maintain separate company wise record of payment of dividends to the non-
resident shareholders either by remittance or for credit to the Non-resident lnvestor's Taka
Account (NlTA, see Ch 14) as the case may be, under the above general permission, so as to
facilitate their inspection by the Bangladesh Bank.

(g) Remittance of pre-liberation dividend will, however, require prior approval of Bangladesh Bank.
Such application should be forwarded by the ADs to the General Manager, FEID, Bangladesh
Bank, Head Office, Dhaka on form TM along with all requisite documents for approval.

(h) Export of dividend warrants

Dividend warrants can be freely exported to the non-resident shareholders of both Bangladesh
and foreign controlled companies provided the shares have been issued against payments in
foreign exchange received through the banking channel or against payments out of NITA in the
name of the shareholder in accordance with the general approval of the Bangladesh Bank
accorded in this behalf.

(i) Remittance of profits to foreign partner in joint venture

For joint venture enterprises, Bangladesh Bank shall allow remittance of the foreign
partner's/collaborator's share of profits on submission of application along with audited Balance
Sheet, Profit & Loss Account etc, and other papers as per instructions contained in this
paragraph.

344 1I'age
 Corporate Laws and Practices

32. (a) Subscriptions to foreign media services

On applications from the local newspapers, ADs may remit foreign exchange towards cost of
subscription of news items, features, articles of foreign news agencies. Remittance should be made
on the basis of (i) contracts entered into between the applicant and the foreign news agency and (ii)
NOC of the Ministry of lnformation.

(b) Cost/fees for Reuter monitors

ADs may remit abroad costs/fees on account of their own subscription to foreign media services such
as Reuter monitor service, without prior Bangladesh Bank approval.

(c) Cost/Fees for SWIFT

ADs may remit abroad costs/fees on account of their own subscription to SWIFT service provider
without prior Bangladesh Bank approval.
33. Advertisement of Bangladeshi products in mass media abroad
ADs may without prior Bangladesh Bank approval effect remittance towards cost of advertisement of
Bangladeshi products in mass media abroad. Remittance applications from the companies/firms in
Bangladesh should be supported by the invoice from the foreign mass media concerned, and the
applicant will have to submit copy of the advertisement within one month of its issuance. The AD
shall preserve the invoice, application and advertisement copy for post facto checking by inspection
officials of Bangladesh Bank.
34. Bank charges and sundries
(a) The ADs may effect remittances towards settlement of dues to foreign banks of bank charges,
cost of cables & other incidental charges arising in their normal course of the business without
prior Bangladesh Bank approval. All such remittances should be reported to the Bangladesh Bank
along with appropriate return.
(b) ADs may effect remittance towards cost of agent services of legal process under the USA
PATRIOT Act of 2001 after satisfying themselves with the genuineness of the request through
agreement/proforma invoice duly accepted and after deducting all applicable taxes.
35. Outward remittance by local satellite channel distributor to principal abroad
Outward remittance required by the Local Satellite Channel Distributors toward their Principals
abroad may be remitted by the ADs subject to obtaining prior permission from Bangladesh Bank. lt is
mandatory that the annual audited balance sheet of the local distributor will have clear information
about the income received from this sector. ln that case, amount determined after adjustment of
commission receivable by the agent/distributor as mentioned in the contract, government tax and
others, if any, from the gross income, can be remitted abroad after obtaining permission from
Bangladesh Bank. To obtain permission for remittance, the concerned Authorized dealer bank shall
submit the following documents to the Bangladesh Bank after proper scrutiny thereof:
(a) A statement containing information on monthly collection of fees by individual cable operator;
government tax paid by the cable operators; amount receivable by the local agent/distributor as
fees; other deductibles (if any) and amount to be remitted in favor of the foreign principal(s);
(b) Copy of the monthly statement of revenue collected from the local customers by the
agent/distributor;
(c) Copy of invoice received from the foreign principal(s) (based on the statement of monthly
collections).

345lFage
 Corporute Laws and Practices

(d) The auditors' certificate on outward remittance stating whether tax at source is deductible or not,
if so whether tax at source has been deducted or not
(e) Copy of TIN Certificate and copy of documents pertaining to the payment of deducted income
tax;
(f) An undertaking by Chief Executive of the agent/distributor (as per AppendixS/76) to the effect
that in case of excess remittance to the foreign principal(s) due to error in calculation or by
mistake or otherwise, the amount so remitted will be brought back/repatriated/adjusted;
(e) Audited Balance Sheet, Profit and Loss A/C Statement and other financlal statements for the year
to which the remittance relates;
(h) Number of imported Decoder(s)/lRD(s) by the distributor from the principal (as per Letter of
Permission from the Office of Chief Controller of Export and lmport, Commercial lnvoice and
Packing List) and a detailed list of cable operators to whom the Decoder(s)/lRD(s) was(were)
distributed. On being satisfied about the genuineness/correctness of the documents listed
above, the Authorized dealer bank on behalf of the agent/distributor shall apply to FEOD,
Bangladesh Bank, Head Office along with form TM and all other necessary/relevant documents
for sending remittance abroad. Remittance can only be made after obtaining approval from the
above mentioned department.

35. Membership fee to foreign professional and scientific institutions

ADs may allow remittances on account of membership/affiliation fees payable by local

business/professional entities to the professional/scientific institutions abroad without prior
permission of Bangladesh Bank as mentioned in Para 9, Chapter l_1.

37. Software maintenance/support fees

AD may continue to effect remittance of periodical maintenance/support fee for software during the
tenure of the agreement for which maiden approval was accorded from Bangladesh Bank. ln this
context, the AD banks shall satisfy themselves with the bonafides of the subsequent requests
through invoices and validity of the relevant agreement and comply with the instructions contained
in first time approval letter of Bangladesh Bank.

38. Remittance on account of legal expenses of banks

Banks may need to be involved in legal proceedings abroad for taking legal action against any party
thereon or to face any litigation abroad sued against them. ln both of the cases, bank may require
outward remittance(s) of foreign exchange. Prior approval of Bangladesh Bank will be required for
making any remittance for the first time needed for such legal proceedings.

However, once permission is granted for any case for the first time, subsequent remittances (if any)
needed for the same case may be done without prior permission of Bangladesh Bank. Bank, while
applying to Bangladesh Bank for such remittance, AD shall have to submit the opinion of its own
legal adviser regarding justification of being involved to the litigation and prospect for winning
thereto along with permission of the board of directors of the bank concerned for participating in
such legal proceedings.

3461F*g*
 Corporate Luws and Pructices

39. Remittance facilities to lT/software firms

ADs may remit up to USD 30,000(Thirty thousand) on behalf of lT/software firms in a calendar year
on account of international alliance/software registration fee, domain registration/hosting fee,
server ma!ntenance fee, account verification/remittance test fee, etc. without prior approval of
Bangladesh Bank subject to compliance of the following drill:

(a) ADs shall ensure that the services against which fees have been paid are subsequently provided
for;

(b) lnvoice/demand note from the beneficiary abroad along with relative documents will have to be
attached to the application for remittance;

(c) ADs shall ensure deduction of applicable tax and payment thereof;

(d) An undertaking from the applicant company to the effect that, in case of wrong or excess
remittance, the amount remitted will be repatriated to Bangladesh immediately on demand.

(e) BASIS will issue letter of recommendation for a particular firm to a specific AD of applicant's
choice. All subsequent letters of recommendations are to be addressed to the same AD. ADs
shall maintain separate file for each firm to ensure maintenance of limit as mentioned above for
verification by Bangladesh Bank inspection team.

(f) Within the limit of USD 30,000, ADs may issue lnternational card favoring a nominated official of
lT/Software firm for USD 6000 with the recommendation of BASIS. The international card may be
refilled for another USD 6,000 subject to production of documents evidencing the fact that the
previous transactions were carried out for the purposes mentioned above. ADs shall ensure that
the aggregate amount of refills of international card and outward payment through other means
do not exceed USD 30,000 in a calendar year. ADs shall report the transactions to the concerned
area office of Bangladesh Bank.

40. Remittance of lT Expenses through Virtual Cards (debit, credit or pre-paid) lnternational card
issuing banks may issue 'Virtual Card' to individual developers/freelancers of mobile Apps and Games
having acknowledgements/training/boot-ca mps/hackathons/course participation certificates on
mobile application development arranged by government authority, BASIS, or its member
organization and any other recognised training/academic institutes for online payment of fees for

a) Registration/license fees to reputed online or mobile application marketplace like Google,

iTunes, Firefox, Windows, Blackberry, etc.

b) Any associated license fees such as game engine or other software license for mobile application
or game development

c) Online training fees for programs such as vendor certification examination, etc.

d) Any domain registration/renewal, hosting/cloud solutions within the scope of mobile/game

application development, However, The release of foreign exchange for these purposes shall not
exceed USD 300(three hundred) or its equivalent in a calendar year.

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 Corporate Laws and Practices

41. Outward remittance of commission earnings of 'foreign brokerage firm' against service rendered
to foreign portfolio investors in Bangladesh
Local stock brokerage firms actingon behalf of foreign stock brokerage firms (registered and
operating abroad) to aid foreign portfolio investors for trading of securities through NITAs in
Bangladesh can remit share of commission earnings to their foreign counterpart brokerage firms
through ADs without prior approval of Bangladesh Bank subject to observance of the following
stip u latio ns:

(a) The local brokerage firm (agent) shall have required permission from relevant Government
Bodies (including BSEC)to operate their business in Bangladesh.

(b) The local brokerage firm shall request concerned AD for necessary arrangement to remit
commissions/fees abroad with documents/information as mentioned in FBC-1 (Appendix 5/77).
(c) Only commission/service charge earned from trading of securities of the foreign investors
through BO Account opened with the concerned brokerage firm/securities custodian bank and
NITAs (opened with any AD) shall be considered for sharing with the foreign brokerage firm after
deduction of taxes and other items (if any) for subsequent remittance to abroad in accordance
with the agreement signed between the two parties.
(d) Local brokerage firm (agent) shall request the AD for the purpose of remittance to foreign
brokerage firm (principal) abroad. Commission/service charge payable to the foreign stock
brokerage firm shall be determined on monthly basis [FBC-2(Appendix 5/78)] in accordance with
the agreement signed between the two parties. The statement must be certified by the auditor
of the local agent. Supporting documents should contain information relating to transaction
volume against stock trading on behalf of non-resident portfolio investors, amount of
commission/service charge earned and the amount payable to the principal on account of
commission/service charge. Commission/service charge earned in one month may be remitted in
any subsequent month. Applications to AD should be accompanied by invoices raised by the
brokerage firm abroad for the claimed amount.
(e) AD shall report the transactions as per FBC-2 (Appendix 5/78) and supporting documents with
usual monthly returns to the FEOD, Bangladesh Bank, Head Office/concerned Office of
Bangladesh Bank following the month of remittance. Besides, consolidated information about
remittance of commission earnings shall have to be reported to FEID, Head Office/concerned
Office of Bangladesh Bank on half yearly basis (Jan-June information to be submitted by next
August and july-Dec information to be submitted by next February) in the format in FBC-3
(Appendix 5179) for post facto checking.
(f) ADs and Brokerage firms shall also adhere to the instructions mentioned in Section-I, Chapter 17
of this Guidelines.

42. Trading at Border Haats

lndia and Bangladesh have opened 'border haats,' or 'common marketplaces' in different places of the
border of the two countries for carrying on traditional border trade at these places in terms of the
Memorandum of Understanding dated October 23, 2010 signed between the Government of the
People's Republic of Bangladesh and the Republic of lndia. To facilitate transactions in these haats, it
has been decided that pursuant to the authorization conferred by the Government of Bangladesh
underSection25of theForeignExchangeRegulation Acl,L947 (ActVll of 19471, operationsof Section
5(1) and 5(3) of the said Act shall remain suspended in respect of purchases by each individual not
exceeding Bangladesh Taka or lndian Rupee equivalent to USD 100 (one hundred dollars) for any
particular day in the border haats (Please see Appen dix3/21).

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CHAPTER 11: PRIVATE REMITTANCES

t. Transfer of assets of foreign nationals retiring from Bangladesh

Foreign nationals leaving Bangladesh permanently after expiry of period of service in terms of
relevant employment contracts, may transfer abroad their genuine savings out of salaries/benefits
clearly stated in the employment contracts duly approved by the BIDA/BEPZA/BEZA or other
competent government authorities. They shall also be eligible to transfer abroad the retirement
benefits such as provident fund, pension, gratuity due as per employment contracts approved by the
BIDA/BEPZA /BEZA, etc.

2. The ADs may, without prior approval of Bangladesh Bank, effect remittance of retirement

benefits and savings including sale proceeds of investments in government securities made in
accordance with Para 5 below (but not including sale proceeds of real assets such as household
articles, real estates and other real assets, requests if any for remittance of such sale proceeds
should be forwarded to Bangladesh Bank); as per instructions in the following paragraphs.

3. (A) Application and supporting documentation.

Application as per proforma at Appendix 5/80 duly filled in by the applicant and his employer should
be accompanied by :

(l) Form TM duly filled in and signed by the applicant;

(ll) (a) A certificate from the employer showing:

(i) Net salary and allowances for each year;

(ii) Provident fund and leave salary paid on retirement; (iii) Bonus and other gratuitous
payments for each year;

(iv) Whether the cost of passage for self and family is being paid by the employer.

A certified true copy of the employment contract approved by BIDA or competent authority of the
Govt. of Bangladesh should be produced in support of the above. Where any of the above payments
are not covered by the original service contract, a certified copy of the resolution of the board of
directors of the employer company allowing the payment and approval thereof from the Govt.
Department which originally approved the employment of the foreign national should be submitted.

ln case of persons employed in the private sector, certified true copies of the relative permission
letters for employment issued by the appropriate Govt. Department should be attached,
(b) Bank's encashment certificate in support of receipt of funds, if any, from abroad.
(c) AD's certificate in regard to the applicant's investment in Govt. securities made for availing of the
income tax relief showing also the amount realized from the sale proceeds and income accrued
on the investments,
(d) Bank's certificate showing:
(i) Total amount of remittances made on account of family maintenance.
(ii) Total amount of remittances made on account of leave salary.

ln case where the period of stay exceeds 10(ten) years, the bank's certificate should cover the period
of last 10(ten) years.

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(e) Statements of transactions in bank account for the last one year prior to the date of the
application with explanation of sources of credit entries of Tk. 500(five hundred) or more other
than those relating to receipt of salaries and allowances.
(f) Application for transfer of actuarial reserve and relative insurance record in respect of insurance
policy, if any, is required to be submitted through the insurance company concerned.

The statements/certificates mentioned in the sub-para (b), (c), (d), (e) and (f) above are to be
prepared by the ADs themselves on the basis of their own records.
(g) Clearance certificate in respect of income tax and other taxes payable.
(h) For remittance of pension/provident fund/gratuity on account of an employee retiring from a
foreign-owned/foreign controlled organization, a certificate signed jointly by the employer
organization and its nominated AD that the relevant pension fund/retirement fund out of which
the retirement benefits are payable are maintained in Bangladesh and that no remittance
towards contribution to any retirement fund maintained abroad has been made in respect of the
applicant employee.

(B) Examination and processing of applications

(l) Before effecting remittance of retirement benefits the ADs should verify with reference to the
terms of employment contract approved by the competent government department (currently
BIDA/BEPZA/BEZA, etc.)that the benefits applied for remittance are indeed due as per terms of
the employment contract. ln case of applicants retiring from foreign owned/foreign controlled
companies, the ADs shall satisfy themselves, with reference to the certificate mentioned at para
3(AXllXh)that the relative pension/retirement funds are maintained locally.

(ll) Before effecting remittance of funds representing savings, the ADs shall carefully examine the
applications and supporting documents to satisfy themselves that the amount applied for
remittance are the genuine savings out of the applicant's own legitimate earnings in Bangladesh.
For this purpose they will look into the information on earnings of the applicant such as
approved salary, allowance, bonus etc., debits for the applicant's local expenses out of such
earnings, outward remittances already made or to be made; and inward remittances received
from abroad, if any.
Details of credits to bank account of the applicant during the preceding one year at least should be
scrutinized to ascertain that only the items of the applicant's own legitimate earnings have been
included in arriving at the amount of savings applied for remittance.

lf on the basis of the above examination there emerges sufficient grounds to believe that the amount
applied for remittance is in excess of the applicant's possible genuine savings, the AD shall effect
remittance only to the extent of its own estimate of the applicant's genuine savings and thereafter
refer the case to Foreign Exchange Operation Department, Bangladesh Bank for further
consideration regarding the excess amount, with such additional explanation /representation as the
applicant may wish to furnish.

(lll) Pension payments: ln cases where pension is payable at regular intervals after the initial lump
sum payment of retirement benefits, the ADs shall effect remittances of regular pension
payments provided that life certificate in respect of the pensioner issued by the paying banker
abroad is produced and the AD is satisfied on the basis of documentary evidence that the
relative pension fund is maintained locally.

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4. Remittances effected in accordance with the above instructions will be reported by the ADs to the
concerned area office of Bangladesh Bank in the usual monthly returns. The ADs shall maintain full
records of cases of remittance of retirement benefits and savings of foreign nationals disposed of by
them, for eventual examination by the inspecting officials of Bangladesh Bank.

5. lnvestments by foreign nationals in certificates/securities etc.

All requests for investment by foreign nationals in Bangladesh Govt. securities such as defense
savings certificate etc., for the purpose of claiming income tax relief against investment allowance
should be submitted through the applicant's bank to the Bangladesh Bank for prior approval. While
forwarding the application to the Bangladesh Bank, the bank will furnish a certificate to the following
effect on the application form:

(i) The investment is proposed to be made out of the applicant's genuine savings in Bangladesh.

(ii) The applicant does not have local borrowings and overdrafts.

(iii) The proposed investment is for qualifying for tax relief against the investment allowance allowed
by income tax authorities.

If, however, the applicant has local borrowings and overdrafts, full details thereof should be
furnished viz.,

(i) The date on which the loan /overdraft was obtained;

(ii) The purpose for which the loan /overdraft was obtained; and

(iii) The amount of loan/overdraft outstanding as on the date of application for investment in Govt.
secu rities.

5. Remittance of sales proceeds of real assets

Application for remittance of sale proceeds of realassets such as household articles and real estates,
should be forwarded to the Bangladesh Bank with the following documents /certificates:

(i) Statement of sale proceeds realized in respect of locally purchased articles of value Tk. 500(five
hundred) or more mentioning:

a) Description;

(b) Purchase price;

(c) Date of purchase;

(d) Date of sale and

(e) Sale proceeds realized.

Relative sale receipts or their certified true copies should be produced.

(ii) A statement of sale proceeds realized in respect of articles imported/brought from abroad of
value Tk. 500 or more mentioning (a) description (b) landed cost in Bangladesh (c) date of import
(d) date of sale (e) sale proceeds realized. Relative import documents and relative sale

receipts or their certified true copies should be produced.

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7. Legacies and other distribution of assets from the estates of deceased persons

Application for remittance of legacies and other distributions from estates of deceased persons due
to beneficiaries resident outside Bangladesh should be forwarded to the Bangladesh Bank. Such
applications should contain the following information and supporting documents:

(i) Name, nationality and place of residence of the deceased at the time of his death. lf the
deceased person was resident of Bangladesh the period of such residence should be stated.

(ii) A copy of the relative clauses in the Will after probate has been granted or if the deceased died
intestate, in the Letters of Administration; in both cases authenticated by a Notary Public, any
Court, Judge or Magistrate in Bangladesh or in the country of residence of the deceased if he
died abroad.

When making applications a full statement of the assets of the deceased in Bangladesh should be
given including a statement of bank account and all other assets. The balance in the bank accounts
representing income earned during the year should be stated separately in cases where the
deceased was a person resident outside Bangladesh. The amounts which are not allowed to be
remitted to the beneficiaries will be permitted by the Bangladesh Bank to be credited to a blocked
account in the name of the executor or administrator with a bank in Bangladesh. lf any security,
shares and real estate which have been specifically bequeathed to persons resident outside
Bangladesh are to be transferred to such beneficiaries, the application should also contain full
particulars of such securities, shares and real estate.

8. Family remittance facility

(a) Foreign nationals who are resident in Bangladesh and who have an income in Bangladesh are
permitted to make monthly remittances to the country of their domicile out of their current
savings up to 75(seventy five) percent of their net income to cover their commitments abroad.
Such monthly remittances may be sent to other countries where family members of them live in
as declared by them in prescribed application form(Appendix 5/81).

(b) This remittance facility is not available to foreign born wives of Bangladesh nationals

(c) The AD bank branch that receives the pay checks from the employer for credit of the personal
account of the foreign national shall process and approve such remittance applications
submitted as per Appendix 5/8L along with Form TM and attested copy of the employment
contract duly approved by the BIDA or other relevant Govt. authority (renewed/revalidated up to
date, where needed).

(d) Salary on which remittance entitlement is calculated would exclude monetary value of various
facilities, such as, free house, transport, servants, boarding etc., as also cash payments towards
conveyance, entertainment, house rent etc. The term 'net income' would in this context signify
gross income of the applicant less allcompulsory deductions such as, income tax, provident fund
and pension fund, house rent and other deductions which are of a fixed nature. Bonus or
commission receivable by foreign nationals cannot be added for calculating monthly entitlement
in anticipation of the grant of bonus or commission, the inclusion will be made only after the net
amount of bonus or commission has been actually paid by the employers and will be spread over
the subsequent twelve months.

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 Corporate Laws and Practices

(e) Remittance of leave salaries of foreign nationals

Net salary (as calculated in terms of the preceding para) of the foreign nationals payable for the
period of leave admissible to them as per their service contract duly approved by the Govt. will
be remittable. ln Such cases a declaration from the employer to be obtained to the effect that
leave for which remittance is claimed has been earned exclusively on service tendered in
Bangladesh. Such remittance should be effected on approach by the employer, The employer
should also be advised that the remittance for the remaining period will not be admissible should
the employee return to Bangladesh earlier than the period for which it was intended for. Family
remittance facility will not be admissible for the period for which leave salary will be availed of.

(f) Foreign exchange issuance against family remittance facility/leave salary for travel abroad
Foreign exchange may be released for short travels abroad during approved employment period
of the foreign national and his/her spouse and other family members; amounts so released
should be adjusted from the monthly remittance entitlement, or from the leave salary remittable
as per sub-para (e) above. Such release of foreign exchange would be against tickets evidencing
confirmed date of travel within two weeks from the date of issuance of foreign exchange in TCs.

(g) Remittances effected in accordance with the above instructions will be reported to the
Bangladesh Bank in the usual monthly returns of the ADs. The ADs shall maintain full records of
such remittances, for eventual examination by inspection officials of Bangladesh Bank as also for
reference while processing applications for remittance of savings on retirement from Bangladesh

9. Membership fees, fees for application, registration, admission, examination, etc.

The ADs may release foreign exchange towards remittance of membership fees of foreign
professional and scientific institutions, both for individuals and corporate in Bangladesh. They are
also allowed to remit fees for application, registration, admission, examination (TOEFL, SAT etc.) in
connection with admission into foreign educational institutions on the basis of written application or
demand notice/letter from the concerned foreign institution showing the amount to be remitted.
The draft/TT etc. to be issued for such remittances should be payable direct to the lnstitution
concerned and the transaction should be reported to the Bangladesh Bank in the usual monthly
return.

Besides traditional mode of payment, international

cards (lCs) may be used for online payment
through internet of fees mentioned above. lndividuals not holding lCs in their names may also make
such online payment through internet using 'Virtual Card' for the required amount by an lC issuing
bank for use through its designated bank branch. Online lC transactions including Virtual Card
transactions shall have to be reported to Bangladesh Bank in accordance with instructions at para 20,
Chapter L9.

10. Release of foreign exchange for study abroad

Prior approval of Bangladesh Bank is required to release foreign exchange for study of Bangladeshi
students abroad at school level. However, ADs are allowed to release foreign exchange for admission
and study by Bangladesh nationals in regular courses such as undergraduate, post graduate,
language course pre-requisite to bachelor degree & professional diploma/certificate courses in
recognised institutions abroad subject to verification of bonafides according to the following drill:
 Corporate Luws and Practices

(A) Application and required papers

(i) Application (Appendix 5/82) duly filled in;
(ii) Original and photocopy of admission letter issued by the educational institution in favor of
the student (such as the l-20 in the case of US institutions);
(iii) Original and photocopy of estimate relating to annual tuition fee, board and lodging,
insurance, incidental expenses etc. issued by the concerned educational institution (l-20 in
case of US institutions);

(iv) Attested copies of educational certificates of the applicant; and

(v) Valid Passport.
(B) Examination and processing by AD

(a) After scrutinizing the application and the supporting documents submitted, the AD shall
issue foreign exchange as per estimate furnished by the educational institution.

(b) ln each case of sale of foreign exchange, the front page of the original letter of
estimate/acceptance letter issued by the concerned educational institute should bear clearly
the round stamp of the foreign exchange issuing bank branch and also the signature of the
officer of the said branch.

(c) After verifying the original copies of papers referred to in para (A) above, the foreign
exchange issuing ADs would attest the photocopy thereof and preserve the same.
Thereafter, the original copies would be returned to the applicant.

(d) Foreign exchange payable to the educational institution should be issued in favor of the
institution concerned in the form of TT/MT/Draft. lf payment on account of board and
lodging/incidental expenses etc. are not required compulsorily to be in favor of the
educational institution, foreign exchange on these counts may be issued in favor of the
student in the form of TC/Draft etc. Educational institutions sometimes require applicants to
send advance amounts for processing of applications, retention of seats etc. lf the papers of
the foreign educational institution clearly state such requirement, advance remittance may
be effected. ADs may also release foreign exchange for study of Bangladeshi students in
permissible courses abroad in favor of the designated intermediary payment processing
entity provided it is clearly mentioned in the admission documents (l-20, Admission
Acceptance Letter etc.) of the concerned main educational institution that fees, charges etc.
are to be remitted through their designated entity. Besides, on application from the
concerned student, unused annual travel quota may also be allowed in freely convertible
currency out of travel entitlement described in Para 1 of Chapter 12 of this Guidelines.

of Health Coverage/ Health lnsurance/

ADs may also release foreign exchange on account
Medical lnsurance fee provided that such fees are mandatory for Visa/Admission in
permissible courses supported by documentary evidence (l-20, Admission Acceptance Letter,
Offer Letter etc.) from the concerned educational institution.

(e) The facility of purchase of foreign exchange/remittance will not be admissible for more than
one academic year at a time.

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(f) For each release of foreign exchange subsequent to the first release, the current progress
report and current estimate of the educational institution should be taken into
consideration. The Ads shall maintain separate file for each student with all relevant papers
in readiness for perusal by inspecting officials of Bangladesh Bank

(g) All purchases of foreign exchange throughout the entire duration of a course of study
pursued abroad should be from one AD bank branch. For any intended change in this
respect, the relevant file shall be transferred direct to the concerned new AD branch on
written request by the student.
Under no circumstance should the file be handed over to the student.

(h) Deposit in foreign currency to blocked accounts abroad for visa/admission processing against
study purpose lf students intending to study abroad are required to deposit foreign currency
to be blocked in designated bank accounts or student accounts abroad opened in accordance
with the guidance of foreign educational institutes/embassies/high commissions, they are
allowed to open such blocked accounts abroad to which necessary funds as set by foreign
institutes/competent authority in foreign currency may be released after observing the
following instructions:

(i) ADs shall get ensured with documentary evidence that the deposits will be refundable in
case of non-availability of visa;

(ii) ln case of non-availability of visa, ADs shall ask students/guardians to arrange

repatriation of remittance for which ADs shall obtain due undertaking from them;

(iii) ADs shall follow up students to the effect that they will proceed abroad within one year
of remittance;

(iv) The deposits remitted as blocked fund for future use shall be adjusted as relevant
expenses including foreign bank charges for the study with proper documentation
therein.

(C) Release of foreign exchange for studying abroad in special cases

ADs are allowed to release foreign exchange for admission and study by Bangladesh nationals in
regular courses such as undergraduate, post graduate & professional diploma/certificate courses in
institutions abroad as per instructions mentioned above. Sometimes students get themselves
admitted into the foreign institutions without taking away foreign currency from Bangladesh source.
Besides, ADs may need to release foreign exchange in cases of changing institution, changing subject
and opening of student file for new higher course by the students. ln these cases, ADs may allow the
remittances on being satisfied after scrutiny of following documents and in compliance with above
mentioned paragraph:

a) Release of foreign exchange for the student studying abroad

(1) Complete and satisfactory explanation regarding request for releasing foreign exchange for
study abroad after leaving the country;
(2) Documentary evidence in support of admission executed earlier;
 Corporate Luh's and Prsctices

(3) Academic results of previous semesters;

(4) Sources and amount of the expenses incurred as of date.

b) Change of educational institution

(1) Reasonable explanation by the applicant for the change;

(2) Certificate evidencing that the new institute has agreed to accept the credits earned in the
present institution.

c) Change of subject

(1) Reasonable explanation by the applicant for the change.

d) Opening of student file for new higher course after completing one course
(1) ln compliance with the prevailing instructions on release of foreign exchange for study
abroad.

11. (A). Remittance of Consular Fees

Consular fees collected by foreign embassies in Bangladesh Taka and deposited in a Taka Account
maintained with an AD solely for depositing the consular fee collections may be remitted abroad
without prior Bangladesh Bank approval. Besides, collection of visa processing fees through
nominated resident agents of foreign embassies may be remitted abroad to bank account designated
by embassies or their home offices. ln this context ADs shall observe the following instructions :

(i) Collection of visa fee shall be as per the rate determined by the concerned embassies;
(ii) ADs shall obtain invoice from embassies/home offices supported by visa applicant-wise
statement of col lection;
(iii) ADs shall ensure deduction of applicable taxes.

(B) Remittance of visa fee abroad

(i) Visa fee is remittable abroad by individuals also if embassies of those countries are not
located in Bangladesh on the basis of the demand of the foreign embassies concerned. Such
fee is also remittable to the visa agents abroad nominated by the concerned countries as per
invoice/ requirement of the concerned embassies after deduction of applicable taxes.

(ii) Online payment of visa processing fees through lC as per requirement of concerned
Embassies/High commissions may be effected also. lC issuing banks may also issue Virtual
Cards for individuals not holding lC to facilitate the online payment of visa processing fees

The AD shall report such remittance in the online monitoring system as well as usual monthly
returns to the concerned office of Bangladesh Bank.

12. Remittance of immigration visa processing fees, evaluation fees, right of landing fee. lmmigration
visa processing fees and evaluation fees for evaluation of educational certificates demanded by
foreign lmmigration Authorities from resident Bangladesh nationals applying for immigration visa,
may be remitted by ADs as per demand notes of the Foreign lmmigration Authorities, on approach
by the applicants. Besides, ADs may also allow remittance on account of 'right of landing
fee/permanent residence fee' required for resident Bangladesh nationals finally proceeding abroad
for migration. Such fees may be remitted in favor of immigration authority abroad upon

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establishment of bonafide of the demand. While processing the case of remittance on account of
right of landing fee/permanent residence fee, ADs are advised to obtain the following
papers/documents from the applicant:
(i) application of the candidate;
(ii) copy of passport;

cH 11 118
(iii) fee schedule;
(iv) letter from authority (demand note/offer letter);
(v) Nikah-nama (for spouse who has been selected);
(vi) copy of medical report;
(vii) money receipt for medical check-up.

Such remittances shall be reported to the area offices of Bangladesh Bank in the usual monthly
retu rns.

Fees relating to immigration may also be remittable to the agents nominated by the concerned
authorities complying the relevant instruction in this regard.

13. Remittance for family maintenance abroad by residents

Applications for remittance of moderate amounts of foreign exchange for maintenance of family
members (dependent parents, spouses and children) living abroad may be forwarded by ADs to the
Bangladesh Bank for consideration and prior approval. Each application should be supported by a
certificate issued by the relevant Bangladesh Embassy regarding residency of the beneficiaries,
extent of income abroad along with the Embassy's recommendation as to moderate requirement for
family maintenance purpose. The certificate should also indicate the purpose for which the family
member(s) went abroad, reasons for continued residence abroad and the probable period of stay
abroad.

14. Registration/participation fee for attending training, seminar, workshop abroad

ADs may release foreign exchange on account of registration/participation fee of the Officials of
Govt., Autonomous/Semi-autonomous institution, empioyees of banks and financial institutions
operating in Bangladesh, faculty members of nationally recognized banking training institutions,
employees/officials of company/firm/institution/NGO registered and operating in Bangladesh under
the existing laws of the country subject to observance of following terms and conditions:

a) the invitation letter is received in the name of applicant from the organizing institution;
b) the tour must be approved by the employer;
c) the fee as indicated in invoice/demand note is reasonable;
d) the program of training/seminar/workshop is appropriate for the intending employee/ official
based on his/her job specification;

e) the program of training/seminar/workshop is financed out of budgetary allocation of the

institution;

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f) request for remittance of more than one time for attending training/seminar/workshop in a year
favoring a single person is to be justified;
g) request letter to remlt the fee from the employer is received;
h) registration certificate of the concerned institution is received.
i) remittance should be in the form of FTT/FDD only favoring organising institutions.

ADs shall report the transactions to the FEOD or other office of Bangladesh Bank in monthly
returns/statements. ADs are also advised to collect and retain copies of completion certificate, travel
documents from the applicants upon return to Bangladesh for eventual inspection by Bangladesh
Bank.

15. Remittance for academic/research journal subscription

ADs may allow remittance of subscription fee for academic/research journals to be procured from
abroad by public universities and medical colleges, recognised national research/training institutions,
University Grants Commission (UGC) approved private universities and Govt. approved private
medical colleges up to USD 3000 (three thousand) or equivalent for an institution per calendar year
against production of invoice/relevant supporting documents subject to establishment of bonafides.
Such remittances are to be reported to Bangladesh Bank .

16. Remittance towards publication related fees of articles in internationaljournals

ADs may release foreign exchange towards remittance of fees for pr"rblication of articles in reputed
international journals written by resident Bangladeshi nationals. While effecting remittance, ADs
shall satisfy themselves about the genuineness of the invoices from the publishing
companies/publishers abroad and deduction of applicable taxes.

17. Registration fee on account of medica! check-up for migrant workers

Migrant workers before proceeding abroad may need medical check-up with medical centers
approved by the concerned countries for which candidate-wise registration fee is payable to the
approving authorities of the countries. ln such cases ADs may, upon request from approved medical
centers, remit fee to the bank account of the beneficiaries on account of registration fee for medical
check-up services to migrant workers subject to production of invoice specifying details of the check-
up and deduction of applicable taxes,

18. Other private remittances

Applications for remittances by private individuals for purposes other than those mentioned above
should be made on Form TM on which full details of the purpose of the remittance should be stated
and full documentary evidence in support of the application should be attached. The Ads must
satisfy themselves regarding the bonafides of each case through personal knowledge of the
applicant, if any, or evidence which the applicant may be able to produce. After thus satisfying
themselves, the ADs should certify the application and forward it to the Bangladesh Bank for
consideration. ln each case the nationality of the applicant should be stated and if the applicant is
not a resident in Bangladesh, the country of residence of the applicant should be clearly stated. lf the
applicant is a foreign national, the period of residence in Bangladesh and his intention as to future
residence should be declared. Particulars of any permit obtained by him for making monthly
remittances to his country of domicile should be given.

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CHAPTER 12: TRAVEL

L. (i) Release of foreign exchange for travel abroad: endorsement on passport and ticket

The amount of foreign exchange released by an AD to a traveler with the approval of the
Bangladesh Bank or under general authority given to the ADs by Bangladesh Bank should be
recorded by them on the traveler's valid passport as well as ticket under their stamp and
signature at the time of release of such exchange. Release of foreign exchange in excess of USD
200 or equivalent will require valid visa except in the cases mentioned in sub-para (viii) below.
However, while issuing foreign exchange to the Diplomats/Privileged persons/UN personnel,
Govt. officials travelling on official duties, such endorsement in their passports need not be
made. The AD should verify to satisfy itself that the ticket covers a journey to be undertaken not
later than two weeks after the date on which exchange is issued. No exchange should be sold
against tickets, which do not specify the date of departure.

(ii) The ADs may release foreign exchange up to USD 5000(five thousand) or equivalent per person
during a calendar year to Bangladesh nationals proceeding to destinations in SAARC member
countries and Myanmar. Also for visits of Bangladesh nationals to destinations in countries other
than those mentioned above, up to USD 7000(seven thousand) per person may be issued during
a calendar year. Out of the prescribed entitlement, ADs may release up to 5,000(five thousand)
in the form of USD notes and the remainder in other freely convertible currencies at any one
instance as mentioned in Para 18, Chapter 5. For resident Bangladesh nationals proceeding
abroad against one way ticket for valid job or migration or study abroad, ADs may release the
entire unused foreign exchange of the annual travel entitlement of the person concerned in the
calendar year. lrrespective of foreign exchange entitlement, the outgoing passenger is permitted
to take up to Bangladesh Taka L0,000(Ten thousand) in cash at each time.
The above limits are indicative. Bangladesh Bank will authorize release of foreign exchange for
travel abroad beyond these indicative Iimits upon submission of documents regarding the
bonafides of the expenses. Application for such authorization should be sent to FEOD/other
office of Bangladesh Bank.

(iii)The annual quotas mentioned above are for adult passengers. For minors (below 12 years in age)
the applicable quota will be half the amount allowable to adults.

(iv) While releasing foreign exchange for travel abroad, the AD should verify and satisfy itself that any
foreign exchange released for an earlier travel was utilized with the journey being actually
undertaken or was duly encashed unutilized.

(v) The travel entitlements mentioned above may be utilized also by way of international cards
issued in the names of the persons concerned. lnstructions relating to the issue and use of such
cards are laid down at Chapter L9.

(vi) While releasing foreign exchange for travel purposes the ADs should ensure that

(a) the intending traveler is a client of the AD bank or is sufficiently well known to the AD bank
for it to be satisfied about the bonafide of the application;

15ql:
 Corporate Laws and Practices

(b) the intending traveler is in possession of a confirmed air ticket (where applicable) for journey
to be undertaken;

(c) the amount released is endorsed on the passport and air ticket (where applicable) of the
traveler with indelible ink, with the signature and name of the AD branch embossed in the
passport and ticket (where applicable); the same has been reported to the 'Online Foreign
Exchange Transaction Monitoring System' of Bangladesh Bank.

(d) the amount of foreign exchange endorsed/issued (in the forms of cash, international card,
etc.) so far during the current calendar year against annual travel quota has been checked to
prevent issuance of foreign exchange beyond allowable quota.

(vii) ln each case of release of foreign exchange for travel abroad, photocopies of first six pages of
the passport/in case of machine readable passport, photocopies of first two pages, page bearing
visa on the passport (if available), the page recording endorsement of foreign exchange and
photocopies of the pages of ticket showing name of the passenger, route and date of journey
and endorsement of foreign exchange along with the relative form TM should preserved by the
ADs as mentioned in Para 4, Chapter L. These transactions shall be reported in usual monthly
returns to Bangladesh Bank.

(viii) Release of foreign exchange to the resident Bangladesh nationals travelling abroad without visa

ln case of travelling some countries, visa is obtainable on port entry/arrival basis. ln such case
ADs may release foreign exchange without visa to the resident Bangladesh nationals proceeding
to the countries/zones with provision of visa on port entry/arrival basis up to the unused annual
travel quota entitlement applicable for country concerned subject to complying with other
relevant instructions. Besides having validity of the passport of the intending traveler for a
period of minimum six months, the applicability of providing visa on port entry/arrival basis for
travelling the country concerned shall have to be ensured by the AD upon receipt of information
from the concerned passenger. However, utilization of foreign exchange issued without visa as
mentioned above shall have to be ensured by AD prior to issuance of foreign exchange for the
subsequent foreign tour of the passenger concerned.

ln case of releasing foreign exchange for official visits abroad by the officials of
Government/Semi-Government and Autonomous bodies (Para 3)the above mentioned facility of
issuing foreign exchange without visa for traveling the countries/zones having provision of visa
on port entry/on arrival basis will also be applicable.

2. Release of foreign exchange for travel on health ground

All applications for foreign exchange for travel abroad on health grounds should be submitted in
form as at Appendix 5/83, in duplicate. Up to USD 10,000(ten thousand) or equivalent may be
released by the AD on the basis of the recommendation of the Medical Board set up by the Health
Directorate or on the basis of the need established through recommendation of appropriate medical
specialists and the cost estimate of the foreign medical institution. Request for release of foreign
exchange exceeding USD 10,000(ten thousand) for treatment abroad should be forwarded by the AD
with supporting documents to Bangladesh Bank (FEOD/other office) which will authorize release
upon verification of the bonafides of the expenses.

360 lFegi:
 Corporate Laws and Practices

3. official or semi-official visits by employees of government/autonomous semi-autonomous bodies

(i) For official or semi-official visits abroad by the officials of

Government/Autonomous/Semi-
autonomous institutions etc., ADs may release foreign exchange as per entitlements fixed by the
Ministry of Finance/respective competent authority from time to time. ln such cases, the
applicant for foreign exchange shall be required to submit the Competent Authority's
Order/Notification/Circular authorizing the travel abroad.

(ii) Release of foreign exchange on account of 'overseas allowance' in favor of the cockpit and cabin
crews of Biman Bangladesh Airlines Ltd.

ADs may release foreign exchange on account of overseas allowances of the cockpit and cabin
crews allowed by Biman Bangladesh Airlines Ltd. Before releasing foreign exchange, ADs shall
observe the following instructions:

a) An approval letter from Biman Bangladesh Airlines Ltd. in favor of the crews specifying the
amount to be released should be obtained.

b) The amount released should be endorsed properly on the passport of the crews

Licensed Money Changers may also release foreign exchange for above purpose observing the
instructions as laid down above,

4. Release of foreign exchange for attending seminar, conference, workshop, training etc. abroad

Authorized Dealers may release foreign exchange to private sector participants for attending
seminar, conference, workshop, training, etc. abroad at the scale of up to (i) USD 350(three hundred
and fifty) per diem for SAARC member countries or Myanmar and (ii) USD 400(four hundred) per
diem for other countries. Foreign exchange may be released only for the actual period of the
program to be held on the basis of invitation letters received in the names of the applicants or their
employer institutions. Photocopy of the invitation letter and all other related documents should be
kept in record by the ADs for post facto scrutiny by the inspection officials of Bangladesh Bank.
Release of foreign exchange beyond the above mentioned indicative limits will be allowed by
Bangladesh Bank upon submission of requests supported by documented proof of the expenses.
Application for such release should be sent to Bangladesh Bank (FEOD or other offices).

5. Release of foreign exchange by debiting Convertible Taka Account for travel abroad

Foreign exchange may be released to private individuals as well as to officials of Govt., Autonomous
and Semi-autonomous bodies for undertaking educational tours, attending seminars, workshops etc.
abroad by debit to convertible Taka accounts of foreign NGOs and lnternational Bodies at their
request. ln the cases of officials of Government/ Autonomous/ Semi-autonomous bodies, the
application for release of foreign exchange should be accompanied by the permission letter of the
competent authority authorizing their proposed travel abroad.

6. (a) lssue of TCs and foreign currency notes to foreign nationals

The ADs may issue foreign currency TCs to foreign nationals without any limit and foreign
currency notes up to USD 5000(five thousand) per person (Para 18, Chapter 5) against surrender

361 lf)*g*
 Corporate Luws and Practices

of equivalent amounts in other foreign currencies. The TCs and foreign currency notes should,
however, be delivered only on production of a ticket for a destination outside Bangladesh and
the amount issued should be endorsed on the relative passports. ln case of travel by car, the ADs
may accept export-cum-import permits in lieu of tickets.

(b) lssue of foreign currency notes to foreign currency account holders Foreign currency account
holders may draw foreign currency notes from balances of their respective accounts without any
limit [up to 5000(five thousand) in USD notes, Para 18, Chapter 5] against endorsement on
passport and ticket for a destination outside Bangladesh.

7. Business travel quota entitlements for exporters, manufacturers for domestic markets and
importers. Business travel quota entitlements for exporters, manufacturers for domestic markets
and importers will be as under:

(i) Exporters, importers and producers for the local market will be entitled to foreign exchange
quota for travel abroad @ USD 400(four hundred) per diem, subject to limits of USD 4,000 (four
thousand) per trip and USD 10,000(ten thousand) over a calendar year. (ii) Senior level (top two
tires) expatriate foreign nationals employed in business organizations in Bangladesh with valid
visa and work permit will be entitled to the above mentioned business travel quota as
Bangladesh nationals.

The above entitlement may be used through international cards (prepaid/credit) held by
Authorized officials of the enterprise concerned (Para 9, Chapter 1-9). Genuine requirements
beyond the entitlements enumerated above will be accommodated by Bangladesh Bank upon
submission of application supported by documents establishing bonafides of the additional
requirements. Application for such release should be sent to Bangladesh Bank (FEOD or other
office, Bangladesh Bank).

8. Disposal of unspent foreign exchange by returning residents

Attention of all persons granted foreign exchange for travel should be drawn to sub-section (3) of
Section 4 of the FER Act, 1947. No person acquiring foreign exchange for travel may use it for
purposes other than living or travelling expenses in the country for which exchange is issued and in
case of special allotment, for purposes other than those for which exchange is sanctioned. On return,
unspent amounts brought back [with declaration in FMJ form for amounts more than USD 5000(five
thousandl may freely be encashed to Taka or may be retained in RFCD accounts, up to USD 5000(five
thousand) may be retained in hand.

9. Reconversion of unspent Taka into foreign exchange by foreign tourists

ADs may allow re-conversion into foreign exchange of the unspent Taka funds of foreign tourists (i.e.
foreign nationals on temporary visit to Bangladesh except those on employment in Bangladesh) on
production of the certificate evidencing the encashment of foreign currency brought in by the
tourist. Re-conversion shall be allowed by the same AD with which the foreign currency was
encashed earlier, on the strength of the original encashment certificates which will be retained by
the AD while allowing re-conversion. The FMJ Form containing the declaration of the foreign
exchange brought in at the time of arrival should be asked for and retained by the AD where re-
conversion exceeds USD 5000(five thousand). Likewise, licensed money changer whether it
encashed earlier or not may reconvert the unspent Bangladesh Taka belong to the foreign tourist up

3621Y' a g. e
 Corporate Lah,s and Practices

to USD 500(five hundred) or equivalent provided that the tourist submits system generated
encashment certificate (Para 10.B, Chapter 2) issued by any licensed money changer. While providing
reconversion, money changer shall stamp on the original encashment certificate to the effect that
reconversion has been executed and preserve a copy thereof. Besides, to facilitate returning foreign
tourists/non-resident Bangladesh nationals general permission has been accorded to re-convert their
unspent Bangladesh Taka up to USD 100(one hundred) or its equivalent at the bank booths situated
at the departure lounges of international airports in Bangladesh upon presentation of encashment
certificate. While providing such reconversion facility, the bank both will have to preserve the
original encashment certificate/true copy of the encashment certificate attested by the AD/money
changer itself issued against conversion of foreign currency into local currency earlier and copy of
the boarding card of the passenger wherein passport number, date of issue of passport, nationality
and amount of re-converted foreign currency are to be recorded.

10. Release of foreign exchange for Hajj

The Government of Bangladesh announces each year the scale at which foreign exchange may be
issued to intending pilgrims for performing Hajj. Release of foreign exchange should be made as per
instructions to be issued for this purpose by Bangladesh Bank each year.

11. lssuance of tickets for travel abroad

Airlines/Shipping Companies and their Authorized Travel Agents have been given general authority
to issue tickets for travel abroad subject to the following instructions:

(i) Travel abroad by resident Bangladesh nationals

Tickets against payment in Bangladesh Taka may be issued by the Airlines/Travel Agents of these
travels on completion of P Form (Appendix 5/56) in duplicate and production of valid passport with
valid visa, involving journey by a route and at a fare approved by the CAAB. ln case of travel abroad
by officials of Govt./Autonomous/Semi-autonomous bodies/Public sector corporations or Local
Government Agencies on official duty or as member of official delegation, tickets shall be issued
preferably on Bangladesh Biman.

lf the passport of the intending traveler shows that the traveler is employed with any
Govt/Autonomous/Semi-autonomous bodies or public sector agencies, the Airline/Travel Agent may
issue ticket only if the Order or NOC from the concerned administrative Ministry/Division
Department authorizing the travel is produced. The above provision of issuance of ticket against
payment in Taka would also be applicable for those foreign nationals who work in Bangladesh with
the approval of the competent authorities of the Government of Bangladesh and draw their pay and
allowances in Bangladesh Taka; or whose costs of travel abroad, as per terms of their service, are to
be borne by the employing organization/agency. ln such cases, attested photocopies (in duplicate) of
sanction letters of the competent authorities of the Govt. of Bangladesh and service contract should
be asked for before issuing tickets and submitted to the ADs along with monthly statement.

(ii) Travel of Bangladesh nationals to destinations outside the country on employment

The Airline /Travel Agent should ask for the following documents before issuing/okaying tickets for
such travels:

363 1f;;6*
 Corporate Luws and Prsctices

(a) Form P or P-2, (Appendix 5157\ as the case may be, duly completed.

(b) Valid passport with valid visa. ln case the passport shows that the intending traveler is
employed with Govt. or with any Public Sector Agency/Autonomous body, Order/NOC from
the concerned administrative Ministry authorizing the travel abroad should be produced.

(c) Clearance from The Bureau of Manpower Employment and Training (BMET) in the form of
endorsement in PassPort.

(d) Visa/entry permit issued by the concerned country's Embassy/High Commission in

Bangladesh duly attested by the BMET.

ln case entry permit or visa including group visa is issued from abroad, the same should be
attested by the Bangladesh Mission in that country as well as by the BMET.

ln case the entry permit or visa does not bear attestation by Bangladesh Mission abroad, the
genuineness of the employment is to be certified in clear terms by the BMET.

(iii) Travel abroad by Bangladesh nationals against tickets/PTAs received from abroad

passages may be booked by the Airlines/Travel Agents for the above category of travels on
completion of P-2 Form and production of valid passport with valid visa by the passengers
subject to the condition that the journey will be undertaken exactly for the routes for which
tickets/PTAs have been received. lf the intending traveler is employed with the Govt. or with any
public sector agency or autonomous body, instructions of sub-para (iv) below should be
followed. ln case the PTAs are meant for travel of Bangladeshi scholars/students for studies
abroad, instructions of sub-para (v) below should be followed'

(iv) Travel by Officials of the Govt. and of Public Sector Agencies including Autonomous/Semi-
autonomous bodies against PTAs received from abroad where cost of ticket is paid/borne by
foreign Government Agencies, UN organizations, international non-profit organizations like
lnternational Committee of Red Cross, British Council, Ford Foundation, Commonwealth
Secretariat, Colombo Plan Secretariat, OIC Secretariat, foreign universities etc' for attending
conference, seminars etc. or for any other purpose abroad:

Airlines/Travel Agents may book passages for these travels on production of the following
documents/particulars to them by the travelers concerned:

(a) A photocopy or an authenticated copy of Order/NOC from the administrative Ministry

concerned authorizing the travel abroad. ln cases where the visits are sponsored by any
other Ministry, a photocopy or authenticated copy of clearance from the sponsoring Ministry
should also be produced. These Orders/NOCs should be retained by the Airlines for their
records.

(b) Valid Passport, with valid visa where required.

(v) Travel by Bangladeshi Scholars/Students for studies abroad against PTAs received from abroad
where cost of ticket is paid by foreign governments/foreign universities/ internationally reputed
non-profit institutions like British Council, Ford Foundation, Commonwealth Secretariat,
Colombo Plan Secretariat, OIC Secretariat etc.

3641F*9,:
 Corporate Laws und Pructices

Passages may be booked by the Airlines/Travel Agents for the above categories of travels on
production of photocopy or authenticated copy of Order/NOC from the Ministry which has
sponsored the travel and valid passport with valid visa. lf the intending traveler is employed with
Government or with any public sector agency/autonomous/ semi- autonomous body, copy of
the Order/NOC from the administrative ministry concerned authorizing the travel should be
asked for before booking the passage. The Airline should retain the Order /NOC for their record.

(vi) Travel by foreign nationals, foreign diplomats and privileged persons against encashment of
foreign currency notes/TCs/Drafts or against inward remittance from abroad or by debit to
private foreign currency accounts/convertible Taka accounts maintained by foreign
nationals/firms/companies/organizations with ADs in Bangladesh or against PTAs/tickets
received from abroad Airlines/Travel Agents may issue tickets for the above category of travels
for journeys originating from abroad or from Bangladesh if the person undertaking the travel is
the account holder himself, his/her spouse/children or an employee of the
Firm/Mission/Company /Organization maintaining the foreign currency account/convertible
Taka account subject to completion of P-2 Form by the traveler concerned and observance of the
following drill:

(a) For issuance of tickets against encashment of foreign currency notes/instruments/TTs /MTs
etc. or against encashment of foreign exchange from private foreign currency account,
encashment certificate issued by an AD in the proforma prescribed at Appendix 5/58 should
invariably be produced by the traveler concerned to the Airline/Travel Agent. The passage
should be booked within one month from the date of issue of the encashment certificate.

However, encashment certificate issued by Money changers will not be acceptable for
issuing tickets in this regard. Booking of passage against encashment of foreign exchange
from foreign currency accounts maintained by Bangladesh nationals is admissible only for
passengers holding Bangladesh passports. Airlines/Travel Agents should not issue tickets in
favor of any foreign national against encashment of foreign exchange from foreign currency
accounts maintained by Bangladesh nationals without prior approval of the Bangladesh
Bank. Off-line airlines also should not issue tickets against encashment of foreign exchange
from foreign currency accounts of Bangladesh nationals without prior approval of the
Bangladesh Bank.

(b) ln case of issuance of tickets by debit to convertible Taka account, the cost of passage should
be accepted in the form of Account Payee cheques/Pay Orders drawn on the relevant
convertible Taka account in favor of the Airline/Travel Agent. Where the account holder is
not a Foreign Mission, lnternational Organization, diplomat or a privileged person, a
certificate from the bank concerned in the proforma as at Appendix 5/59 certifying that the
account on which the cheque/pay order has been drawn is a convertible Taka account and
also stating the account number and the amount to be debited, will have to be produced
along with the Cheque/Pay Order. ln cases where the account-holder is a foreign diplomatic
mission, diplomat/privileged person or expatriate personnel of UN and its affiliated agencies
or lMF, IBRD, IDA or other international or regional financial or loan giving agency or their
expatriate personnel, a declaration should be obtained by the Airline/Travel Agent/Shipping
Company from the concerned organization/person showing the name of the bank with
which the convertible Taka account is maintained, the account number and the amount
debited towards cost of passage. The concerned Airline/Travel Agent/Shipping Company

365 11'ap*
 Corporate Laws and Pructices

should submit these declarations to the ADs along with their usual monthly passage
statements. The Airline/Travel Agent shall also obtain a certificate from the account-holder
stating his/her relationship with the passengers in case ticket is to be issued in favor of
spouses or children; and in case of issuance of ticket in favor of officers/staff of foreign
missions/organizations, certificate from the mission or the organization stating that the
intending traveler is their employee should be asked for. Airlines/Travel Agents will submit
these certificates to the ADs along with their usual passage statements.

(c) passages may be booked for travel of foreign diplomats/privileged persons and other foreign
nationals in Bangladesh against PTAs/Tickets received from abroad. Tickets may also be
issued to foreign tourists against approved credit cards brought in by them from abroad'
lssuance of tickets for travel by foreigners not falling within the above categories would
require prior approval of the Bangladesh Bank.

(vii) Travel by ship's crew of Bangladesh origin

(a) ln case of ship's crew of Bangladesh origin proceeding abroad to join vessels abroad, tickets
may be issued against PTAs received from abroad as well as by debit to the foreign Shipping
Company's account maintained in Bangladesh in the name of the Shipping Company or
Shipping Agent. For issuance of tickets against foreign Shipping Company's account, payment
of cost of passage should be received by Account Payee Cheques drawn on the Shipping
Company's account. The concerned Shipping Agent/Company should furnish certificate from
its bank as per proforma at Appendix 5/60 stating the name of the bank with which the
account is maintained, the name of the foreign Shipping Company and the amount to be
debited. The certificate should be submitted to the AD along with the usual monthly passage
statements of the Airline.

(b) Before issuing tickets favoring ship's crew of Bangladesh nationality, the Airline/Travel Agent
must satisfy itself on the basis of documentary evidence that the crew possesses valid CDC
and clearance issued by Shipping Master of Government of Bangladesh about the
recruitment abroad. Copy of the Shipping Master's Clearance should be forwarded along
with the usual monthly passage statement to the AD.

(viii) Travel by ship's crew of foreign nationality

Outward passages of foreign ship's crew of foreign nationality may be booked against inward
remittances or by debit to foreign Shipping Company's account maintained in Bangladesh in the
name of the Shipping Company/Shipping Agent. For booking of passages against inward
remittances, the Shipping Agent/Company should produce encashment certificate from the
concerned bank in the proforma at Appendix 5/58 and the drill as contained in sub-para vi(a)
should be followed. ln case of booking of passages against payment from foreign Shipping
Company's account, bank certificate in the proforma at Appendix 5/60 should be produced and
the relevant instructions of sub- para vii(a) above should be followed.

(ix) Travel against rebated tickets issued by Airlines/Shipping Companies

(a) Tickets against free passages [i.e. 100(hundred) percent rebated] allowed by the Airlines/
Shipping Companies favoring their own employees including family members or to their
Travel Agents may be issued subject to completion of P-2 Form by the traveler concerned.

366 1i).t;1*
 Corporate Laws and Practices

(b) tn respect of partly rebated passages allowed by the Airlines/Shipping Companies to their
own employees including family members or to their Travel Agents, tickets may be issued on
completion of P Form by the traveler concerned for travel abroad once a year.

12. Booking of Passage

(a) (i) Before passages can be booked in terms of paragraph 11 above, the intending travelers shall
be required to fill in and submit the P Form/P-2 Form to the Airline/Travel Agent/Shipping
Company booking the passage. These should be forwarded to the ADs by the airlines while
reporting the sales of tickets in the monthly passage statements'

(ii) Airlines should in their own interest exercise utmost care in booking passage strictly in
accordance with the guidelines given in the above paragraph. For any
irregularity/discrepancy in booking passage under this authority delegated to them, the
concerned officials of the Airline or the Travel Agent will be liable for penal action under the
FER Act, 1947.

(iii) Airlines will furnish monthly passage statements to the AD in respect of passages sold/tickets
issued under the authority given in the above paragraph in the usual proforma together with
the documents as indicated in foregoing paragraphs as per prescribed time schedule.

(iv) lf the Airline/Shipping Company/Travel Agent has any reason to doubt in any case the
genuineness of the certificates/documents produced to them by the intending traveler, they
should immediately get in touch with the concerned area office of Bangladesh Bank for
instructions.

(v) Bangladesh Bank reserves the right to inspect at any time the books and records of the
Airlines, Shipping Companies and the Travel Agents to ensure compliance with the
instructions issued by Bangladesh Bank.

(b) Booking of passage in cases not covered by the general authority given to the Airlines/Shipping
companies/Travel agents at paragraph 11 above would require prior approval of Bangladesh
Bank in Form P/Form P-2. Bangladesh Bank's approvals in these forms shall remain valid for
travel for 3 calendar months from the date of approval. Travel on international sectors should
commence within the validity of P Form/P-2 Form failing which such tickets will require
revalidation even though the journey on domestic sectors against such tickets had been
performed within the validity of the forms.

13. Booking of passage for outward journey

(i) Booking of passage may be made for outward journey by a route and at a fare approved by the
CAAB. Fare ceilings on various routes are notified by the CAAB from time to time for guidance of
the Airlines and the Travel Agents,

(ii) No ticket for outward journey from Bangladesh should be issued by an Airline/Shipping Company
or Travel Agent which do not specify the actual date of departure. lf an application is made
subsequently to the Airline/Shipping Company or Travel Agent to alter or amend the date of
departure they should examine such tickets with a view to determining whether any exchange

\6'7
""'t l' ,,,
: -
 Corporate Luws and Practices

has been drawn against such tickets. Where foreign exchange has been drawn against the ticket,
no extension of date of departure should be granted without specific approval of Bangladesh
Bank in each case.

14. Booking of inward passage

(a) Booking of inward passages against payment in Taka for persons holding Bangladesh passports
who proceeded abroad on one way tickets would require prior Bangladesh Bank approval in
Form P. Booking of inward passages against payment in Taka for foreign nationals would also
require prior Bangladesh Bank approval in Form P.

(b). Airlines/Shipping Companies/their Travel Agents may issue Prepaid Ticket Advices (PTA) in favor
of foreign guests invited by Govt./Autonomous/Semi-autonomous organizations, UN
organizations, local agencies of international organizations in Bangladesh. These PTAs may be
issued against application by the concerned organization in the Form prescribed at Appendix
s184.

15. Refund against cancellation of Tickets

Refunds against cancelled/unutilized tickets/vouchers should be made only after the passenger
produces his/her passport, and after being satisfied that any foreign exchange issued has been
encashed with an AD or the entry has been duly cancelled by an AD or that the document bears no
evidence of any exchange issued to the holder. Sometimes exchange is drawn by one passenger on
behalf of a group of persons travelling together.

ln such cases if any member of the group cancels his/her booking, no refund of passage money
should be made unless his/her quota of exchange has been refunded to or encashed with an AD and
necessary evidence to this effect is produced to the Airline/Shipping Company/Travel Agent. This
requirement of encashment of unutilized foreign exchange applies in all cases, Refunds by the
Airline/Shipping Company/Travel Agent should invariably be made by cheques drawn on the official
account of the Airline/Shipping Company/Travel Agent concerned with a bank in Bangladesh. ln all
other cases, no refund should be granted against part or whole cancellation of ticket unless prior
approval of the Bangladesh Bank is obtained.

However, where a passenger once undertakes the foreign travel it should be construed that the
foreign exchange released to him/her has been utilized for the purpose for which it was released.
Airlines /Shipping Companies/Travel Agents may, in such cases allow refund of the cost of the
cancelled/unutilized portion of tickets without insisting on production of passport of the passenger
concerned if it is otherwise evident that the passenger undertook the foreign travel and stayed back
abroad for any reason.

15. No refund outside Bangladesh

ln all cases of bookings made against payments in Taka, whether single or round trip, no refund
should be granted outside Bangladesh. ln all such cases refunds should be made only in Bangladesh
in Taka to the Bangladeshi nominee/Authorized person of the passenger concerned. All
tickets/vouchers etc., must be marked accordingly. Airlines and Shipping Companies should also
ensure that such refunds are not given in the form of exchange vouchers or in any other form which
can be used for further transportation. All such refunds must be made either by
cheque or by actual cash payment in Bangladesh

368|F.tgi.:
 Corporate Laws and Practices

17. Performance of journey from one place to another outside Bangladesh

Passages for journeys to be performed from one place out of Bangladesh to another place out of
Bangladesh i.e. for performance of journey wholly outside Bangladesh should not be booked against
Bangladesh Taka without the prior permission of the Bangladesh Bank in Form P.

18. Adjustment of cost of passage

Airlines/Shipping Companies/Travel Agents may make adjustment up to Tk. 600(six hundred) without
prior approval of the Bangladesh Bank towards cost of passages approved on Form P within the
validity of the form, if the fare changes upward or downward.

19. Acceptance of fare difference

Airlines/Shipping Companies/Travel Agents may accept freight in local currency for the excess
baggage (accompanied or unaccompanied) only in the following cases without prior approval of
Bangladesh Bank:

(a) Freight for transportation from foreign countries to Bangladesh of accompanied as well as
unaccompanied baggage by the returning Bangladesh nationals on freight to pay basis;

(b) Freight on samples, advertisement materials and presentations imported into Bangladesh on
freight to pay basis as per provisions of IPO in force.

ln both the cases, two sets of dummy P Forms along with the monthly statements are to be
submitted to the ADs,

c. Acceptance of freight of excess baggage

Shipping/Airline Companies or Travel Agents may collect freight in Taka for transportation of
excess accompanied as well as unaccompanied baggage of passengers from Bangladesh to
destination abroad without prior permission from the Bangladesh Bank,

d. Acceptance of Taka freight on FOB imports

Freight in Taka may be accepted by the Airlines/Shipping Companies/Travel Agents without prior
Bangladesh Bank approval for FOB imports into Bangladesh as per instructions contained in Para
1(viii), Chapter 10.

e. Acceptance of freight in Taka against export samples

Airlines/Shipping Companies may accept freight in Bangladesh Taka from registered exporters
against dispatch of bonafide trade samples of exportable items from Bangladesh without prior
approval of the Bangladesh Bank on the basis of Customs Clearance Certificate for dispatch of
the article. Where the value of trade sample exceeds the prescribed limit indicated in Chapter 8,
Para 2(i) of this Guidelines, export permit from the Office of the CCI&E and recommendation of
the EPB should also be asked for. While accepting freight in Taka in respect of consignments of
such export samples, the Airline/Shipping Company will obtain a declaration (Appendix 5/85)

369 1I'*g*
 Corporate Laws and Practices

from the exporter concerned to the effect that the parcel contains bonafide trade sample
without involving any payment in foreign exchange. The Airlines/Shipping Companies while
submitting their returns to the AD will indicate the number and date of the Customs Clearance
Certificate and Export Permit from the office of the CCI&E, reference number and date of EPB's
recommendation and the registration number of the exporter concerned with date,

20. Reference to Bangladesh Bank

Cases of booking of passage/freight not covered in this Chapter may be referred to Bangladesh Bank
for instructions.

2l-. Airlines and Shipping Companies should furnish to the ADs monthly returns of all passages sold,
tickets issued or handed over by them as also of refunds and cancellations as per instructions in
Chapter 10. Although Travel Agents are not required to submit monthly returns, they should
maintain records of all passages sold by them as per appendices 5/44 and 5155.

22. Guidelines for tour operators

To expand the tourism industry of Bangladesh and to facilitate foreign tourists visiting Bangladesh,
the member tour operating firms of TOAB shall observe the following terms and conditions in the
context of foreign exchange transactions:

a) Outgoing Bangladeshi nationals may purchase tour package from TOAB member firms with an
amount of up to 90(ninety) percent of his/her annual travel entitlement in foreign currency.

b) The firm shall issue invoice to the intending traveler in foreign currency for the price of the tour
package. The traveler, in turn, will arrange payment in equivalent Taka through the designated
AD. AD shall endorse the passport of the traveler in equivalent foreign currency mentioning that
endorsement is done from annual travel quota for purchasing tour package against invoice
issued by the tour operator. Afterwards, the AD will transfer the equivalent foreign currency to
the FC account of the firm using the exchange rate of the same day and intimate the transaction
to the firm.

c) AD may release balance of travel entitlement (travel entitlement less tour package value) to the
traveler and endorse the same in the passport in compliance with the instructions stipulated in
Para l- of this Chapter.

d) issue of foreign exchange mentioned in para (b) and (c) above shall have to be reported to the
Online Foreign Exchange Transaction Monitoring System of Bangladesh Bank.

e) ln no cases, foreign exchange exceeding 90(ninety) percent of travel entitlement will be

endorsed for purchasing tour package in spite of value of tour package exceeds the limit.

f) For effecting outward remittance on account of outbound package against concerned invoices,
tour operators shall submit necessary documents to ADs on monthly basis.

Afterwards, ADs may effect remittance on behalf of the tour operating firms on examination of
relevant documents and recording on form TM. Of the total value of tour package, up to 9O(ninety)
percent may be remitted abroad, minimum 7.5(seven and a half) percent shall be encashed in Taka

370lFagr
 Corporate Laws and Practices

and the rest 2.5 (two and a half) percent may be retained in FC accounts for utilization in business
travel abroad by the tour operators. ADs shall ensure deduction of applicable tax/VAT and payment
thereof. On effecting remittance, ADs shall send the relevant documents to FEOD, Bangladesh Bank,
Head Office/area office of Bangladesh Bank for post facto checking.

g) The tour operators shall have to operate inbound tour packages to attract foreign tourists.
lnward tour packages must be at least 25 (twenty-five) percent of total packages sold.

h) ln case of cancellation of outbound package tour, tour operators shall arrange refund of the
payment through encashment of foreign currency in taka and cancellation of endorsement made
earlier in passport, Refund may also be freely remittable to foreign citizens in case of
cancellation of inbound package tour for which payment has been
received in advance.

i) ADs may deposit foreign exchange received in advance from foreign tourists for purchasing of
inbound packages in the FC accounts of tour operators. Besides, foreign tourists may make
payment through international credit cards provided ADs are working as acquiring banks under
merchant agreement with tour operators. Foreign currency paid by the inbound foreign tourists
shall be credited to the foreign currency accounts of the tour operators. The tour operators shall
meet local expenses such as hotel/restaurant bills in Taka through encashment of the balance of
FC accounts. Up to 9O(ninety) percent of the foreign currency received from foreign tourists shall
be encashed into Taka.

j) ADs shall not issue any bank guarantee in favor of foreign tour operator or airline on account of
sales of tour package by tour operators.

k) ADs shall submit the statements of FC accounts and statements of

tour packages sold along with
photo copy of endorsement on passports of tourists, invoices issued by tour operators,
supporting documents relating to rent of hotels and other relevant documents to FEOD,
Bangladesh Bank, Head Office/other office of Bangladesh Bank on monthly basis.

l) The tour operators shall apply to FEPD, Bangladesh Bank through ADs for opening FC accounts
with certificate issued by TOAB mentioning that the applicants are their member firms.

(m)Transactions of such FC Accounts shall have to be reported to the SFCAMS, operated by

Bangladesh Bank as mentioned in Section - Vl, Chapter 13.

371 lP:rg*
 Corporute Laws and Practices

CHAPTER 13: SECTION- |

PRIVATE FOREIGN CURRENCY ACCOUNTS

L. Opening of FC accounts with ADs in Bangladesh

(i) The ADs may without prior approval of the Bangladesh Bank open foreign currency accounts in
the names of

(a) Bangladesh nationals residing abroad

(b) foreign nationals residing abroad or in Bangladesh and also foreign firms registered abroad
and operating in Bangladesh or abroad

(c) Foreign missions and their expatriate employees. Bangladesh Bank may specially allow
opening of foreign currency accounts not covered by this general authorization.

(ii) Foreign exchange earned through business done or services rendered in Bangladesh cannot be
put into these accounts. Credits to a foreign currency account may be made against inward
remittance of foreign exchange in any form or transfer from another foreign currency account or
non-resident Taka accounts of banks abroad.

(iii) Payments may be made freely abroad from these foreign currency accounts to the extent of
balances lying therein. Local disbursements may also be made freely in Taka from such foreign
currency accounts.

(iv) No payment in foreign exchange may be made to or on behalf of any resident in Bangladesh out
of the foreign currency accounts opened as per the above arrangement. However, this
restriction will not apply in case of foreign diplomats and privileged persons or any other person
or firm who have specific authority from Bangladesh Bank to accept such payments. Bills of the
local contractors of the foreign missions in Bangladesh may also be settled in foreign currency
from the balances of the foreign currency accounts of such missions, ln such cases the
beneficiary of the bill will have to encash the foreign currency with any AD within one month
from the date of receipt.

(v) Any payment received in foreign exchange by the ADs on behalf of residents of Bangladesh must
not be retained in foreign exchange but must be converted into Taka unless the AD is satisfied
that the payee has the general/special permission of the Bangladesh Bank to retain the foreign
exchange.

(vi) The ADs maintaining foreign currency accounts under this authority can pay interest on such
accounts being maintained in the form of term deposits for the period of one/three/six/twelve
months at the prevailing Eurocurrency deposit rates. ADs may apply interest on prevailing
Eurocurrency deposit rates also on non-resident foreign currency accounts not specifically
maintained as term deposit, for balances not less than USD 1000(one thousand), Pound Sterling
500(five hundred) or equivalent in other currency lying in the accounts for one month or longer
period.

372 1i]*g*
 Corporate Laws and Pructices

2. FC Accounts of non-resident Bangladeshis

(i) Bangladesh nationals working and earning abroad including self-employed Bangladeshi migrants
proceeding abroad on employment may open foreign currency accounts even without initial
deposits. They may operate the accounts themselves or nominate other persons in Bangladesh
for this purpose. The accounts can be opened in Pound Sterling, US Dollar, Euro or Japanese Yen
at the option of the prospective account holder and maintained as long as the account holder
desires. These accounts would ordinarily be fed from remittances by account holders themselves
but funds sent by other wage earners may also be placed to the credit of such accounts. ADs may
also raise credits to such accounts with the proceeds of convertible foreign exchange viz.
currency notes, travelers'cheques, drafts etc. brought into Bangladesh by the account-holders
while on temporary visit to Bangladesh provided such foreign exchange in excess of USD 5000 (or
its equivalent) has been duly declared by them to the Customs on Form 'FMJ' at the time of their
arrival. Foreign currency brought in by NRBs may be deposited to such FC accounts through bank
booths operating in airports as mentioned in Para 1(D), Chapter 6.

(ii) Payments may be made freely abroad from these foreign currency accounts to the extent of
balances lying therein. Local disbursements may also be made freely in Taka from such foreign
currency accounts. Funds lying to the credit of FC accounts of Bangladesh nationals can be
utilized for import of goods and commodities as per instructions issued by the CCI&E and
Bangladesh Bank.

(iii) lnterest on such accounts can be applied as mentioned in 1(vi)of this chapter

3. FC Accounts of Diplomatic Bonded Warehouse

ADs may open foreign currency accounts in the names of the Diplomatic Bonded Warehouse (duty
free shops) licensed by the Custom Authorities on following conditions:

a) Convertible foreign currency (notes and coins, travelers'cheques, drafts, cheques or credit card
settlements) received only on account of sale of merchandise may be credited to these accounts.

b) Foreign exchange may be remitted abroad only for the purpose of import of merchandise by the
bonded warehouse. For the same purpose foreign exchange may also be transferred from such
accounts to foreign currency accounts maintained with other ADs.

For meeting local expenses, foreign exchange from these accounts may be encashed freely at
current exchange rate. The requirement of encashment of at least 50 (fifty) percent of the gross
profit (sale price of merchandise minus purchase price of merchandise) of the Bonded
Warehouse in foreign exchange should be duly fulfilled.

c) Monthly statement of purchase, sale and foreign exchange transaction related thereto along with
bank certificate concerning encashment in Taka shall be submitted to the FEOD, Head Office or
other office of Bangladesh Bank in prescribed form (Appendix 5/3). Besides, ADs are required to
report transactions through such FC accounts in Statement S-13 along with relevant schedule
[Chapter 2, Para 16(c), Vol. 2].

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 Corporate Laws and Pructices

4. FC accounts of local and joint venture contracting firms

Foreign currency accounts in the names of local and joint venture contracting firms employed to
execute projects by foreign donors/international donor agencies may also be opened by the Ads as
per terms of the approved contract with the government authority without prior permission of
Bangladesh Bank. Only foreign exchange received from the donors/donor agencies to meet expenses
of the project can be credited to these accounts. All expenses in foreign exchange as per relevant
contract may be met from these accounts. These accounts should be closed as soon as the
transactions relating to the project are concluded.

Besides, ADs are required to report transactions through such FC accounts in Statement S-13 along
with relevant schedule [Chapter 2, Para 16(c), Vol. 2].

5. Foreign nationals residing in Bangladesh are allowed to maintain and operate their foreign
currency accounts abroad.

6. FC Accounts of residentBangladesh nationals working with foreign/international bodies Foreign

currency accounts may be opened in the names of resident Bangladesh nationals working with the
foreign/international organizations operating in Bangladesh provided their salary is paid in foreign
currency. Such account may be credited only with the foreign currency portion of the salary and
debited for all approved current transactions Iike cost of travel, education for children, treatment
etc. Local disbursements may also be made freely in Taka from such foreign currency accounts.
Foreign currency accounts may also be credited with consultancy fees/honoraria received in foreign
currency by the above mentioned category of residents, debits to such accounts being subject to
same conditions as mentioned above. Besides, ADs are required to report transactions through such
FC accounts in Statement 5-L3 along with relevant schedule [Chapter 2, Para 16(c), Vol. 2].

7. lt will be in order for the ADs to issue cheque books to foreign currency account-holders

8. ln terms of Government Notification No. 1(8)-EF/58 dated 20th August, 1958 (Appendix2lS), issued
under Section 9 of the FER Act, 1947 all citizens of Bangladesh and other persons residing in
Bangladesh continuously for six months or more who became owner of any foreign exchange
whether held in Bangladesh or abroad are required to sell such foreign exchange to an AD within one
month of the date of acquisition by them of such foreign exchange. This provision of repatriation of
foreign exchange will not, however, apply to the following cases viz:

(i) Foreign exchange held abroad by foreign diplomats and foreign nationals employed in Embassies
and Missions of foreign countries in Bangladesh.

(ii) Foreign exchange held abroad by foreign nationals or foreign business houses, except to the
extent representing earnings abroad in respect of business conducted in Bangladesh or services
rendered while in Bangladesh.

(iii) Foreign exchange held by Bangladesh nationals in accounts abroad which were opened and
credited while the account holders were working abroad as resident outside Bangladesh.

(iv) Foreign contractors or consultants working in Bangladesh under contract with any government
department or public sector agency or in a project under any loan, credit or grant, where the
relevant contract provides for payment of their fees and emoluments partly or entirely in foreign
exchange abroad.

374 l11xg*
 Corporate Laws und Practices

(v) Expatriate employees of foreign contractors or consultants as mentioned in sub-para

(iv) above where the terms of their employment provide for payment of their salaries partly or
entirely in foreign exchange abroad.

(vi) Foreign nationals stationed in Bangladesh as employees of foreign concerns situated abroad and
receiving part of their emoluments in Bangladesh for subsistence and the balance abroad for
meeting other expenses, including maintenance of their families, will not also be required to
repatriate the portion of their emoluments received abroad.

Besides the above mentioned exemptions from repatriation requirement, there are exemptions from
surrender (encashment) requirement in respect of (i) portion of repatriated export proceeds that is
allowed to be credited to the exporters retention quota account (Please see Chapter 13, Section -lV),
(ii) foreign exchange brought in at the time of return from abroad that can be credited to RFCD
account (Chapter 13, Section-lll) and (iii) up to USD 5000(five thousand) brought in undeclared at the
time of return from abroad that can be retained at hand (Chapter 6), For the purposes of the
aforesaid Notification the term "residents in Bangladesh" excludes citizens of Bangladesh in foreign
countries so long as they stay outside Bangladesh but includes foreign nationals who reside
continuously in Bangladesh for six months or more.

9. Payments by foreign nationals in foreign currencies

Payments in foreign currency by foreign nationals residing in Bangladesh to or on behalf of residents

of Bangladesh whether Bangladeshis or foreign nationals are prohibited except to a firm like a gift
shop or an establishment like a hotel holding a valid Authorized money changer's license. Foreign
nationals should not, therefore, directly or indirectly, make foreign currency available to the
residents or to other persons on their behalf against payment in Taka. Such payments are prohibited
even from their foreign currency accounts which they are permitted to maintain and operate from
Bangladesh.

175 I i' :r ,, ,'

 Corporate Laws and Practices

SECTION - ll: NON-RESIDENT FOREIGN CURRENCY DEPOSIT ACCOUNT

10. Opening of account

All non-resident Bangladesh nationals and persons of Bangladesh origin including those having dual
nationality and ordinarily residing abroad may maintain interest bearing time deposit accounts
named "Non-Resident Foreign Currency Deposit (NFCD) Account" with the ADs.

11. Bangladesh nationals serving with Embassies/High Commissions of Bangladesh in foreign countries
and also the officers/staff of the government/semi-government departments/nationalized banks and
employees of body corporate posted abroad or deputed with international and regional agencies like
lMF, World Bank, lDB, ADB etc. during their assignments abroad may open such accounts. Crew
members of the Bangladeshi shipping companies are not entitled to open such accounts, but shore
staff posted abroad may open such accounts. Accounts may also be opened with funds transferred
from existing foreign currency accounts maintained by the wage earners with the ADs in Bangladesh.

12. How to open the account

The accounts are in the nature of term deposits maturing after one month, three months, six months
and one year. The accounts may be maintained in US Dollar, Pound Sterling, Euro or Japanese Yen;
initially with minimum amount of USD 1000(one thousand) or Pound Sterling 500(five hundred) or
equivalent. Accounts may be opened against remittances in other convertible currencies after
conversion of those into US Dollar, Pound Sterling, Euro or Japanese Yen.

13, These accounts may be maintained as long as the account holders desire. Eligible persons are also
allowed to open such accounts at anytime after return to Bangladesh. NRBs may, aftertheir return
to Bangladesh, open NFCD accounts with ADs to credit their retirement benefits, periodical pensions,
superannuation benefits etc. as per employment agreement with employers while on service abroad.
The balances held in the accounts may be used for settlement of legitimate payment abroad, subject
to production of documentary evidence and deduction of applicable taxes.

14. Eligible Bangladesh nationals may send application along with a set of specimen signatures of the
opener of the account to an AD in Bangladesh duly verified by Bangladesh Mission abroad, or a
reputable bank or any other person known to the AD in Bangladesh. The application forms may be
had from Bangladesh Missions abroad and from the ADs in Bangladesh or their branches abroad. No
set of specimen signatures will be required to be enclosed with the application form if the
application is submitted to an AD with whom the applicant has already been holding a foreign
currency account. ln such case a reference to the respective FC account number will serve as self-
introduction and the account opening branch will verify the signature with the specimen signature
maintained for the FC account.

15. lnterest on deposits

The ADs will pay interest on deposits into the accounts at the Eurocurrency deposit rates. ln case of
premature repayments, the interest amount will be forfeited to the depositing AD. The interest on
deposits into this account is exempted from the tax payable under lncome Tax Ordinance,

376 11]*g*
 Corporate Laws and Practices

16. The ADs in Bangladesh may at their option sell foreign exchange deposits (in US Dollars only) to the
Bangladesh Bank without any lower limit at the Bangladesh Bank's buying rate and repurchase the
principal and interest at the Bangladesh Bank's selling rates prevailing on the day of repurchase. The
ADs may also invest abroad the amounts deposited with thern and pay interest to the depositors out
of earnings from such investments.

17. Repatriation of principal and interest

The account holder can freely repatriate the balance and the interest accrued thereon in foreign
exchange to the country of his residence or anywhere he chooses and may at his option, convert the
balance into local Taka at the prevailing exchange rate.

18. Foreign nationals and companies/firms registered and/or incorporated abroad, banks, other financial
institutions including institutional investors and 100(hundred) percent foreign owned (A-Type)
industrial units in the EPZs/EZs in Bangladesh, are also allowed to open and maintain NFCD accounts
with the ADs. The minimum amount of time deposits in such cases should be USD 25,000(twenty-five
thousand) or its equivalent in Pound Sterling, Euro or Japanese Yen. Other terms and conditions in
respect of these account-holders will be the same as those mentioned above for NFCD accounts of
non- resident Bangladesh nationals.

19. Utilization

The ADs may utilize sO(fifty) percent of the balances of NFCD accounts for (i) discounting of usance
export bills of Type A and Type B units of EPZs/EZs and (ii) payment of back to back LC opened on
sight basis. Amounts so utilized should immediately be replenished on realization of respective
export proceeds.

20. Reporting

Separate monthly statements summarising currency wise transactions in the NFCD accounts of all AD
branches of a bank should be submitted from the head offices/principal offices of the banks as per
proforma at Appendix 5/86, by the 15th of the following month that which it relates to the FEOD,
Head Office or other offices of Bangladesh Bank.

1a- I tt .-
1/ / I i' ',i ii "
",,1'..:-
 Corporate Laws and Practices

SECTTON-lll: RESIDENT FORETGN CURRENCY DEPOSIT ACCOUNT

21. Persons ordinarily resident in Bangladesh may open and maintain Resident Foreign Currency Deposit
(RFCD) accounts with foreign exchange brought in at the time of their return from travel abroad. Any
amount brought in with declaration to Customs Authorities in form FMJ and up to USD 5000(five
thousand) brought in without any declaration, can be credited to such accounts. However, proceeds
of export of goods or services from Bangladesh or commission arising from business deals in
Bangladesh shall not be credited to such accounts.

22. Balances in these accounts shall be freely transferable abroad. Fund from these accounts may also
be issued to account-holders for the purpose of their foreign travels in the usual manner Ii.e. with
endorsement in passport and ticket, up to USD 5000(five thousand) in the form of cash currency
notes and the remainder in the form of TC & or other currencies].

23. These accounts may be opened in US Dollar, Pound Sterling Euro or Japanese Yen and may be
maintained as long as the account holders desire. While depositing foreign exchange for credit to
such account the depositor shall furnish written declaration, mentioning the date of return from
abroad and the amount of foreign exchange brought in, that the foreign exchange (i) is not a receipt
against export of goods or services from Bangladesh, (ii) is not a commission due from abroad arising
from business deal in Bangladesh. The ADs will credit the foreign exchange
presented by the depositor to the RFCD account only after examining the passport of the depositor
and the FMJ form [if the amount exceeds USD 5000(five thousand) or its equivalent] and after being
satisfied about the correctness of the declaration.

24. lnternationalCard

ADs may issue lnternational Card against the balance held in the RFCD account favoring the account
holders (Please, see Chapter-19).

25. lnterest in foreign exchange shall be payable on balances in such accounts if the deposits are for a
term of not less than one month and the balance is not less than USD 1000(one thousand) or Pound
Sterling 500(five hundred) or its equivalent. The rate of interest shall be one quarter percent (0.25%)
less than the rate at which interest is paid on balances of bank in their foreign currency clearing
accounts maintained with Bangladesh Bank.

26. The head offices/principal offices of the banks shall prepare currency-wise consolidated monthly
statements of transactions in the RFCD accounts in all their AD branches (as per Appendix 5187) and
send the same to FEOD, Head office or other offices of Bangladesh Bank, by the 15th day of the
following month.

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 Corporate Laws and Practices

SECTION. !V

EXPORTERS' RETENTION QUOTA {ERQ) ACCOUNT

27. (al Retention quota for merchandise exporters

Merchandise exporters are entitled to a foreign exchange retention quota of 60 (sixty) percent of
repatriated FOB value of their exports. However, for exports of goods having high import content
(low domestic value-added) like POL products including naphtha, furnace oil and bitumen,
readymade garments made of imported fabrics, electronic goods etc. the retention quota is 1-5
(fifteen) percent of the repatriated FOB value.

(b) Retention quota for deemed exporters

Retention quota account may also be opened and maintained in the names of deemed exporters
for supplying inputs against inland back to back letter of credit denominated in foreign currency.
Since foreign exchange earned from direct export is to be shared among direct and deemed
exporters, ADs are obliged for the meticulous compliance of the followings:

(i) the total amount credited to the direct exporter's retention quota account together with
foreign exchange paid to the deemed exporter against supply of input must not exceed the
net repatriated OB export value of the direct exporter; and

(ii) the foreign exchange shall be credited to the retention quota account of the deemed
exporter only after settlement of the amount against back-to-back LC for deemed export.

(c) Retention quota for export of software, data entry/processing and other ICT related services
Exporters of software, data entry/processing and other ICT related services may retain
7O(seventy) percent of net export earnings repatriated in foreign exchange in ERQ accounts.

(d) Retention quota for other service exporters

Service exporters other than those mentioned at para (c) above may retain 60(sixty) percent of
their repatriated export receipts in ERQ accounts against service rendered in non-physical form
However, foreign exchange earnings on account of indenting commission or agency commission
for export from Bangladesh cannot be credited to such accounts since these incomes originate
from Bangladesh sources.

28. (A) Eligible currency and utilization

(i) Foreign exchange out of the retention quota may be maintained in FC accounts with the
concerned ADs in USD, Pound Sterling, Euro or Japanese Yen upon realization of the export
proceeds. Balances in these accounts may be used by the exporters for bonafide business
purposes, such as business visits abroad, participation in export fairs and seminars,
establishment and maintenance of offices abroad, import of raw materials, machinery and
spares, repayment of Authorized foreign loan etc. without prior approval of Bangladesh
Bank. ln addition, ADs on request by the lT/Software exporting firms can remit international

379ll,i:rg*
 Corporate Laws and Practices

alliance/software registration fee, domain registration/hosting fee, server maintenance fee,

account verification/remittance test fee, etc. from the ERQ account of the applicant without
prior approval of Bangladesh Bank. Foreign exchange from the ERQ account cannot be used
for investment abroad by the exporter.

(ii) Transfer of unencumbered foreign currency between the ERQ accounts of same exporter
maintained out of export receipts with different ADs is permissible for bonafide transactions
as mentioned in (i)above. Besides, fund from ERQaccounts of the exporters may be used for
settlement of import liability and repayment of Authorized foreign loan of their
subsidiaries/sister concerns. However, fund from ERQ accounts of the exporters held at
other ADs may be used for (1) settlement of import liability of the exporters and for (2)
settlement of import liability & repayment of Authorized foreign loan of exporters'
subsidiaries/sister concerns under compliance with the following instructions:

(a) Fund transferring AD:

(i) will be used only for imports and repayment of foreign

ADs shall be satisfied that the fund
loan of the exporters or their subsidiaries/sister concerns by other ADs and the fund is
unencumbered.

(ii) Transfer will be executed through FDD to be settled through Bangladesh Bank clearing
accounts of ADs. This instruction shall not be applicable for fund transfer and receipt in the
same AD.

(b) Fund receiving AD

(i) ADs shall retain the fund in margin account till settlement of import payments and
repayment of foreign loan.

(ii) ADs shall settle the import payments in compliance with lmport Policy Order in force, foreign
exchange regulations and other import related instructions. For repayment of foreign loan,
concerned instructions mentioned in Chapter 15 of this publication and loan approval letter
of the competent authority shall have to be followed'

(B) Term deposit and interest thereon

Foreign exchange out of ERQ account may also be kept as interest bearing renewable term
deposits with the concerned ADs in Bangladesh in US Dollar, Pound Sterling, Euro or Japanese
yen, with minimum balances of USD 2,000 (two thousand) or its equivalent. Periods of such term
deposits may be determined in accordance with normal banking practices/normal banking
considerations. lnterest on such deposits may be allowed at rates comparable to the prevailing
euro deposit rates for the relevant currency.

C) Advance payment against import using ERQ accounts

ADs may effect advance payment not exceeding USD 25,000 (twenty five thousand) or its
equivalent from the ERQ account against bonafide business purposes provided the relevant
contract/proforma invoice stipulates for such payment subject to the following terms and
conditions:

380lfag*
 Corporate Luws und Practices

(a) The ADs shall have to be satisfied that repayment guarantee is not obtainable from the
supplier against the remittance to be made in advance;

(b) IPO in force shall have to be meticulously followed;

their own responsibility, have to arrange for repatriation of the remittance

(c) The ADs shall, at
made in advance in case the entry of goods into the country is not effected within the
stipulated time;

(d) While opening Back to Back L/C, the ADs should adjust the value of advance payment to
ensure that the value addition requirement as stipulated in the IPO is not breached ; and

(e) Before effecting the advance payment, the ADs must obtain Form of Undertaking (Appendix
5/15) duly signed by the importer.

29. !nternational card

lnternational cards may be issued to the exporters against balances held in ERQ accounts. The
arrangements for issuance of international cards and use thereof by exporters are described in
Chapter-1-9.

38llilage
 Corporate Luws and Practices

SECTION - V: FOREIGN CURRENCY ACCOUNTS FOR THE EPZ COMPANIES

30. Disposal of proceeds

The following procedures shall apply to release of foreign exchange to the enterprises against
exports made from the EPZs:

(i) 100 (hundred) percent of repatriated export proceeds of a Type A industrial unit in EPZ may be
retained in FC account in the name of the unit with an AD or OBU in Bangladesh. Balances in the
FC account may freely be used to meet all foreign payment obligations including import payment
obligations of the unit and payment obligations in foreign exchange to BEPZA. Balances from the
FC account will also be freely encashable for local disbursements or for crediting Taka account
maintained with an AD for meeting Taka payment obligations like wages, rents, rates, taxes etc.
Taka account maintained with ADs by Type A units in EPZ may be credited only with encashment
of funds from FC accounts or of other inward remittances from abroad. However, receipts from
Taka sales of factory refuses and of unusable portion of raw materials of Type A industries may
be credited to the Taka accounts provided the permission letter of BEPZA for the sale and
evidence of payment of duties/taxes on sale proceeds are produced to the AD. Balances in these
Taka accounts cannot be converted to foreign exchange and may only be used for meeting local
expenses.

(ii) Up to 80 (eighty) percent of the repatriated export proceeds of Type B and Type C units other
than those in the garments sector may be retained in FC Accounts maintained in the names of
the units with their ADs; for a Type B or Type C unit in the garments sector, up to 75 (seventy
five) percent of the repatriated export proceeds may be credited to FC account maintained in the
name of the unit with an AD. The remainder of the export proceeds should be encashed to taka
at the prevailing exchange rate. Besides, Taka accounts of Type B & Type C industrial units may
also be credited with Authorized payment received in Taka in accordance with same instructions
as stipulated in Para 30(i) above. All foreign payment obligations of Type B and Type C units
including import payment and repayments of foreign loans may be met out of the balances in
their FC accounts; payment obligations in foreign exchange of a type B unit to the BEPZA may
also be settled from balances in its FC account. Balances in the FC accounts of the Type B and
Type C units are freely encashable to Taka for local disbursements.

(iii) Equity from foreign shareholders of Type A & B enterprises and Authorized loan received in
foreign currency by Type A, B & C enterprises may be credited in FC accounts of enterprises of
EPZs. ADs may issue a certificate in support of inward equity amount credited in FC account as
per Format (Appendix 5/39 or 5/40, as the case may be). Foreign investment in EPZs (in 'Type A'
and 'Type B' enterprises) is subject to report to Bangladesh Bank within 14 (fourteen) days of
issuance of shares favoring non-resident investors as per instructions stipulated in Para 2,
Chapter 9 of this Guidelines.

(iv) To facilitate business travel abroad by the officials of enterprises located in EPZs, balances of
such accounts may be used through international debit/pre-paid cards also as mentioned in Para
2(b), Chapter 19.

The above instructions shall be applicable for the units of EZs and units of Private Export Processing
Zones also.

382 1!1;:g*
 Corporate Laws qnd Practices

SE N-VI

OTHER FOREIGN CURRENCY ACCOUNTS

31. Foreign currency accounts for lnitial Public Offerings (tpO)

ADs may open foreign currency accounts titled'FC Account for IPO'in the name of issuing company
only to collect subscription for IPO from non-resident Bangladeshis, The AD shall preserve the copy
of the approval of BSEC for floatation of shares and shall immediately inform opening of such
account to the Foreign Exchange lnvestment Department, Bangladesh Bank, Head Office, Dhaka. ln
the event of over-subscription, excess amount should be refunded back in the same currency. Such
accounts should also be closed immediately after the remittance is effected and reported the same
to the above mentioned department with a summary of transactions made through this account as
per Appendix 5/88.

32. Foreign currency accounts for ship builders (exporters)

Export oriented shipbuilders in Bangladesh are allowed to open and maintain FC accounts in ADs for
retaining advance remittances from abroad against ship exports. Balances of these accounts may be
used for payment of input procurements. Separate FC accounts may be opened for each ship for
receiving and payment on per ship basis. Such account opened for one ship shall have to be closed
within one month of delivery of the ship to the foreign buyer by transferring the balance of the
account in usual retention quota account or by converting the balance into Taka. ADs shall submit
the quarterly return of transactions (as per Appendix-5/89) of the above FC accounts to FEOD,
Bangladesh Bank, Head Office/other offices of Bangladesh Bank within second week at the close of
each quarter.

33. Foreign currency accounts of shipping companies, airlines and freight forwarders
Shipping companies/airlines/licensed freight forwarders handling FOB export cargo from Bangladesh
receive payments in foreign currency in settlement of costs incurred by them locally towards internal
transportation, sea freight/air freight, and related other handling charges. Likewise, they have to pay
abroad in foreign currency for similar costs and charges incurred on FOB imports into Bangladesh.
To facilitate these payments in foreign currency for handling of FOB imports from their receipts in
foreign currency against handling of FOB exports, shipping companies, airlines and multimodal
transport operators licensed as freight forwarders by Customs Authorities can open and maintain
accounts in USD or other freely convertible currencies with ADs in Bangladesh. Eligible transactions
through these accounts and other requirements for opening and maintaining of such accounts are
enumerated below :

Eligible credits to these accounts

(a) Accepting freight on FOB exports in FC: Foreign exchange received by shipping companies, airlines
and multimodal transport operators licensed as freight forwarders by Customs Authorities
against their handling of FOB export cargos from Bangladesh may be credited to such accounts
as mentioned in Para L(x), Chapter 10. Shipping companies/airlines may accept freight charges
on FOB exports in foreign currencies from the eligible licensed freight forwarders. ln these cases,
shipping companies/airlines should ask the licensed freight forwarders to make payments in
foreign currency from the foreign currency accounts maintained with their nominated ADs.
(b) Accepting freight on FOB imports in FC: Shipping companies/airlines may accept freight charges
on FOB imports in foreign currencies from the importers/eligible licensed freight forwarders

383 1i)*gi:
 Corporate Laws and Practices

[Para (ix), Chapter 10]. ln this process importers' banks may at the request of their importer
1-
clients make payments of freight charges in foreign exchange to airlines/shipping
companies/eligible licensed freight forwarders, out of the total value of the LCAF issued for the
import covering costs of goods and freight. The receipts in foreign exchange will be used through
the foreign currency accounts maintained by shipping companies/airlines/eligible licensed
freight forwarders. The AD should endorse on the LCAF the amount of freight payable in foreign
currency as stated in the bill of lading/airway bill and to issue a certificate in the form prescribed
in Appendix 5113 for presentation to the shipping companylairline/freight forwarder in
Bangladesh at the time of payment of freight in foreign currency. This is to mention here thaU
ADs shall not credit the FC Account of the concerned shipping company/airline/ Freight
Forwarder in Bangladesh without producing this certificate in case of receiving freight in FC
against FOB imports.

Elisible debits from accounts

Balances of such foreign currency accounts may be debited for the following purposes:

a) Encashment to Bangladesh Taka for meeting local expenses;

b) Foreign currency payable abroad towards costs and charges relating to handling of FOB imports
into Bangladesh;
c) Foreign currency deposited in foreign currency accounts of shipping companies/airlines may be
used for outward remittances on account of surplus earnings.

Balances held in foreign currency accounts shall first be used for outward remittances before use of
local currency fund. However, AD Banks shall get themselves ensured of the encashment of
adequate foreign currency by the shipping companies/airlines to meet local expenses in case of
shortfall in local currency funds and submit the encashment certificates with the statements.
Reporting:
(i) AD banks will inform FEOD, head office or concerned office of Bangladesh Bank immediately (by
the next business day) as and when each such foreign currency account is opened.
(ii) All receipts and payments transactions through these accounts will have to be included in the
monthly collection and disbursement statements routinely submitted to Bangladesh Bank by
shipping companies/airlines through their AD banks. ln this context, collection in foreign
currency should be presented in a separate column of relevant statements as mentioned in Para
5, Chapter L0.

(iii) Transaction statements of these foreign currency accounts will also have to be submitted to
Bangladesh Bank (FEOD, Head Office or concerned office of Bangladesh Bank) on quarterly basis
for post facto checking to satisfy that reasonable amount from the foreign currency accounts
have been encashed to Taka towards defraying of local costs and tax liabilities. Besides, eligible
licensed freight forwarders shall, through AD banks, submit monthly statements to
FEOD/concerned office of Bangladesh Bank as mentioned in Section lll, Chapter 17.

34. Special Foreign Currency Account Monitoring System (SFCAMS)

Transactions of FC Accounts which are opened with specific approval of Bangladesh Bank shall have
to be reported to the SFCAMS, operated by Bangladesh Bank. The purpose of this software is to
monitor transactions of foreign currency accounts. While reporting transactions, ADs are required to
follow the instructions enumerated in the user manual available in the website.

384lPage
 Corporate Laws and Practices

CHAPTER 14: SECTION- |

CONVERTIBLE AND NON LE TAKA ACCOUNTS

1. General

ADs may open convertible Taka accounts in the names of foreign organizations/nationals viz.,
diplomatic missions, UN organizations, non-profit international bodies, foreign contractors and
consultants engaged for specific projects under the Govt./Semi Govt. agencies and the expatriate
employees of such missions/organizations who are resident in Bangladesh. To open such accounts
the above mentioned organizations/individuals except diplomatic missions, UN organizations, non-
profit international bodies will have to submit the copy of permission letter obtained from BIDA or
other competent authorities like BEPZA, BEZA or other Specialized Zones Authorities under Section
18(B) of the FER Act,1947 and Section 1.aQ) of BIDA Act, 2016 to the ADs.

2. Credits to Convertible Taka Account

These accounts may be credited with foreign currency brought in or remitted from abroad or
transferred from a foreign currency account or another convertible Taka account. For transfer from
another convertible Taka account, the Taka amount from the transferor's account would be
converted into foreign currency for transfer and credit to the recipient account by reconversion into
Taka. No money emanating from a business originating in Bangladesh and otherwise repatriable to
Bangladesh can be credited to these accounts.

3. Debits to Convertible Taka Account

A convertible Taka account may be debited for payments in foreign currency abroad, for local
expenses, for transfers to foreign currency accounts or other convertible Taka accounts or for credits
to a non-convertible Taka account.

4. lnterest bearing STD Accounts The ADs may open Taka STD (7-30 days special notice) accounts in the
names of foreign diplomatic missions and their expatriate personnel, foreign airlines and shipping
lines operating in Bangladesh, international non-profit organizations including charitable
organizations, UN organizations and their respective expatriate personnel and pay interest thereon
provided that the amount of interest accrued on balances of these accounts will be disbursed locally
in non-convertible Taka and that no part of the earned interest will be remittable abroad at any
stage.

5. Non-convertible Taka Account

Foreign organizations/their expatriate personnel mentioned at Para 1 above may maintain non-
convertible Taka accounts with ADs without prior BB approval. These accounts may be credited with
funds from convertible Taka accounts, with remittances from abroad, and with Taka received from
Authorized sources including interests from STD accounts. These accounts may freely be debited for
local expenses. No remittance abroad or transfer to an foreign currency account/convertible Taka
account may be made by debit to a non-convertible Taka account.

385 1F;rgc
 Corporate Laws and Practices

SECTION: ll

PRIVATE NON-RESIDENT TAKA ACCOUNTS

6. (i) Non-resident accounts

The accounts of individuals, firms or companies resident outside Bangladesh are designated as
non-resident accounts and are treated as accounts of countries of permanent residence of the
account holders. ADs should establish the countries of permanent residence of all account-
holders and mark the accounts of all non- resident persons, firms or companies as non-resident
accounts; indicating clearly the countries of their permanent residence as established. Where
any doubt exists whether an account is to be treated as non-resident, reference should be made
to the Bangladesh Bank for decision, giving relevant details.

(ii) ln terms of Section 5 of Article ll of the schedules appended to the United Nation (Privileges
and lmmunities) Act, 1948, the accounts of United Nations and its organizations are free from
financial controls. The ADs should therefore treat such accounts maintained with them as
resident accounts. However, the instructions contained in this Chapter will equally apply to the
expatriate employees of the UN and its organizations in Bangladesh except that their convertible
Taka accounts will be credited with (i) funds from official accounts of UN organizations in
Bangladesh, (ii) remittances from abroad, (iii) foreign exchange encashed with an AD in
Bangladesh and (iv) funds from other convertible Taka accounts.

7. Change of residence

All nationals of Bangladesh who go out of Bangladesh for any purpose viz. employment, study,
business tour, pleasure trip etc. are required to be treated as non- resident for the purpose of
Section 5 of the FER Act, 1947 for so long as they remain outside Bangladesh except in the case of
accounts of persons holding office in the Service of Bangladesh who go abroad or who are already
abroad and residing outside Bangladesh for the time being either on duty or on leave. Such persons
will not, therefore, be able to instruct persons in Bangladesh to make any payment on their behalf to
persons in Bangladesh. Such payments, if made, will constitute an offence under the FER Act, 1947
and will be punishable under the provisions of the said Act. lf persons proceeding abroad find that
they have to make certain payments to a person in Bangladesh, they must obtain prior approval of
the Bangladesh Bank before doing so.
However, when such persons come to Bangladesh on temporary visits their accounts may be treated
as "Resident" during the period of their stay in Bangladesh. The ADs will, however, ensure that such
accounts are immediately re-designated as "Non-resident" after the accountholders leave the
country. lt would, however, be in order for the ADs to raise debits and credits to the accounts of such
persons during their absence from Bangladesh for the following:

(a) Debits
(i) Payments on account of insurance premium, club bills or other payments in Bangladesh of
a regular nature for which the ADs hold standing instructions from their customers
provided the payments are supported by bills and vouchers.
(ii) Government and Municipal dues in Bangladesh provided payments are supported by
official claims.

386lFage
 Corporate Laws und Practices

(iii) Debits representing payments in Bangladesh for cost of passages by air or by sea.
(iv) Other payments by cheques drawn in favor of payees resident in Bangladesh.
(v) Debits on account of purchase of shares of public limited companies and/or securities of
the Government of the People's Republic of Bangladesh provided such shares/securities
are purchased and retained by the ADs themselves for and on behalf of the account holder
so long as he resides outside Bangladesh. ln case the shares/securities are required to be
disposed of, the sale proceeds should be credited to the non-resident account.
(vi) Debits on account of disbursements in Bangladesh to resident Bangladesh nationals to the
extent of funds received from abroad through banking channel.
(vii) Debits on account of repayments of instalments of loan direct to a financial institution in
Bangladesh from which the account holder had obtained loan.

(viii) Debits in reversal of previous credits

(b) Credits

(i) Receipts on account of salary, allowances, bonus, commission etc.,

(ii) Dividend and interest income on investments in shares and securities,
(iii) lncome from landed property and agricultural rent,
(iv) House rent and sale proceeds of properties on the basis of documentary evidence,
(v) lnterest accrued on the amounts lying in the non-resident accounts,
(vi) Sale proceeds of shares of public limited companies and/or securities of the Government
of the People's Republic of Bangladesh purchased under Sub-para (v) of Para (7)(a) above,
(vii) Remittances received from abroad through banking channel
(viii) Refund of amount previously debited or over-charged.

ln these cases, the AD must satisfy himself that the credit falls under any one of the exempted
categories and represents the purpose which it purports to do before passing it through the
account.

When a person domiciled in Bangladesh leaves Bangladesh to take up permanent residence in

another country his account should be treated as an account of the country of his new domicile;
similarly, when a foreign national residing in Bangladesh leaves Bangladesh permanently, his
account should be treated as an account of the country of his permanent domicile.

8. New non-resident accounts of persons other than banks

(a) New non-resident accounts in the names of persons or firms or companies other than banks may
be opened only with prior approval of the Bangladesh Bank. The application for approval should
give the full name and permanent address of the applicant and the purpose for which such an
account is required and the manner in which it will be kept in funds.
(b) Non-resident Taka accounts may, however, be opened without prior approval of the Bangladesh
Bank for crediting the proceeds of inward remittances sent through banking, and postal
channels. To the extent the funds credited represent the proceeds of foreign currency, the same
may be freely disbursed locally.

387lFage
 Corporate Luws and Pructices

9 Accounts Bangladesh: Form Q 22 The accounts of all foreign

of foreign nationals resident in
nationals who are resident in Bangladesh and the accounts of companies or firms (other than banks)
persons in
whose head office or controlling interests are outside Bangladesh but are operated on by
Bangladesh may be treated as resident accounts.

The account-holders or persons in Bangladesh Authorized to operate on such accounts

must sign
account opening files.
Form eA-22 (Appendix 5/90) and the same will be preserved in the respective
prior approval of Bangladesh Bank for opening such accounts is, however, not necessary. This form is

an undertaking that the signatory will not provide any foreign currency against reimbursement
in
business in
Taka and that any transaction on the account not directly connected with the signatory's
Bank on
Bangladesh or which represents remittance from abroad will be reported to the Bangladesh
Form A-7 (Appendix S/g1,). Declaration on Form QA-22 need not betaken from members of foreign
has also
embassies, legations, consulates and foreign government officials in Bangladesh. Permission
been given to banks which are not ADs to open taka accounts of foreign nationals in their
books
subject to their signing certificates on Form QA-22.

10. Form QA-22 not required from non-residents

ln the case of non-resident accounts, declarations on Form Q - 22 are not necessary

11. Responsibility of ADs regarding irregular operation on accounts

Notwithstanding the fact that a constituent has signed Form QA-22 the AD must take all reasonable
steps to ensure that the constituent is not making foreign exchange available to any
person in
Bangladesh other than an AD against reimbursement in Taka or is not by any other means
contravening the provisions of the Act. Any irregularity should immediately be brought to the notice
ofthe Bangladesh Bank.

12. Joint account of residents and non-residents

if it
An account held jointly by a resident and a non-resident should be treated as a resident accounts
joint account
is operated solely by the resident or jointly by the resident and the non-resident. lf the
is to be operated by the non-resident only, it is to be treated as non-resident account.

13. Operations on non-resident accounts of persons, firms and companies other than banks

Unless prescribed otherwise by the Bangladesh Bank in respect of any particular

non-resident Taka
shall be
account of persons, firms and companies other than banks, all operations on such accounts
governed by the rules given below. Transactions on such accounts should be covered by a Form A-7
exempted from the completion of
isee Rppendix 5/91) except for transactions which are specifically
Form A-7 as given below. Wherever prior approval of Bangladesh Bank is required, it should
be

obtained on Form A-7.

(l) Credits and debits not subject to report on Form A-7

(a) Credits:

Refunds of amounts previously debited or overcharged

388 11'*p';
 Corporate Laws and Practices

(b) Debits:
(i) Payments in respect of postage, telegram charges, storage or safe custody charges, club bills
and other sundry payments where the amount does not exceed Tk.2000(two thousand) per
month
(ii) Debits in reversal of previous credits.
(iii) Debits in respect of approved remittances in foreign exchange.
(iv) Payments for disbursements in Bangladesh from the accounts which are opened in terms of
para 8(b) of this Chapter and which are fed entirely by remittance from outside Bangladesh.

(v) Debits as mentioned in Para 7 (aXi)to (viii) excepting Para 7(aXiv).

(ll) Credits and debits subject to report on Form A-7 but not subject to prior approval of the
Bangladesh Bank:

(a) Credits

(i) Proceeds of cheques drawn on banks outside Bangladesh or of remittance received from
abroad in favor of the non-resident account holder or proceeds of foreign currency brought
in physically during temporary visits to Bangladesh with declaration on form FMJ with
submission of encashment certificate issued by an AD. However, for USD 5,000 (five
thousand) or below Form FMJ will not be required.

Foreign currency brought in by NRBs may be deposited to such accounts through bank booths
operating in airports as mentioned in Para 1(D), Chapter 6.
(ii) Credits as mentioned in Para 7(bXi)to (vi)

(b) Debits:

1. Cheques drawn in favor of payees resident in Bangladesh not exceeding Tk. 5,000(five
thousand) in any one month;

2. Transactions referred to in Para 7 (a)(iv) provided the value of the cheque does not exceed Tk
20,000(twenty thousand) in any one month.

All other credits and debits require prior approval of the Bangladesh Bank. Form A-7 in respect of
the credits and debits to private non- resident accounts which require to be reported to the
Bangladesh Bank should be forwarded to the FEPD, Head Office, Bangladesh Bank.

14. Responsibility of submitting Forma A-7: Credits to Private to Non-resident Accounts

ln the case of credits to a non-resident account the receiving bank, i.e. the bank who credits a non-
resident account in his books is responsible for ensuring that Form A-7 has been completed and
approved by Bangladesh Bank or an AD as permissible before crediting funds to private non-resident
accounts. ln order that no difficulty may arise in doing so, the following procedure is suggested for
adoption by all banks:

lRg I i]" :r*'r r' e-

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 Corporate Laws snd Pructices

A cheque or draft received for the credit to a non-resident account of a company, firm or person
unless accompanied by Form A-7 should not be passed through the clearing, but should be sent by
the receiving bank to the paying bank stating that a non-resident account is being credited and
requesting in exchange a pay-slip accompanied by Form A-7 duly completed by the drawer or by the
paying bank on his behalf and approved by the Bangladesh Bank or the AD as permissible. A similar
practice should be followed in the case of bank cheques which represent payment of remittances
from abroad for credit to the resident accounts of foreign nationals who have completed Form qA-
22.

15. Responsibility of submitting Forma A-7: Debits to Private Non-resident Accounts

ln the case of debits to non-resident accounts, cheques representing payments other than those
mentioned in paragraph 13(lXbXi), (ii), (iii), (iv) & (v) should be returned by the paying bank with the
remarks "Non-resident account, Approved Form A-7 required". The collecting bank will then arrange
with the customer, for whom the payment is drawn, to submit Form A-7 for approval.

15. Outward remittances

Subject to approval/reporting requirements in form A-7 described in Para L3 of this chapter, debits
to balances in Non-resident Taka Accounts will be permissible also for outward remittances towards:

(i) subsistence expenses of individual account holders and their family member in their country of
residence;
(ii) current payments abroad by institutional account holders for permissible procurement of goods
and services from abroad.

3901i];:g*
 Corporate Laws and Practices

SECTION : llt

NON-RESIDENT BLOCKED TAKA ACCOUNTS

17. Powers of Bangladesh Bank to block non-resident accounts

Section 6 of the FER Act, 'J,947 confers powers on the Bangladesh Bank to "block" accounts in
Bangladesh of any person resident outside Bangladesh and to direct that payment of any sum due to
a non-resident may be made only to such a blocked account.

18. Definition of a blocked account

A blocked account means an account opened as a blocked account at any branch or office in
Bangladesh of a bank Authorized in this behalf by the Bangladesh Bank or an account blocked by the
order ofthe Bangladesh Bank.

19. Opening of blocked accounts A blocked account may not be opened in the name of a resident of
Bangladesh unless it is held jointly with a non-resident. No blocked account may be opened by an AD
or an exlsting "free" account blocked except under directions from the Bangladesh Bank.

20. Payment to blocked account

Sub-section (1Xb) of Section 6 of the FFR Act, 1947 provides that where the Bangladesh Bank has
directed that any payment due to a non-resident may be made to a blocked account in his name with
a bank in Bangladesh, the crediting of the sum due to the blocked account shall, to the extent of the
sum credited, be a good discharge to the person making the payment.

21. ltems payable to blocked accounts

Payments in discharge of liabilities to non-residents, remittance of which outside Bangladesh cannot

be approved by the Bangladesh Bank under the current foreign exchange regulations,
notwithstanding that they may have arisen legitimately and lawfully, will be allowed to be made only
to blocked accounts. For instance, any payment of a capital nature due to a non-resident or a
payment due to a Bangladesh national who has emigrated to another country will be permissible
only into a blocked account in the name of the beneficiary.

22. Bangladeshi emigrants-blocking of accounts

Bank accounts and securities belonging to Bangladesh nationals and foreign nationals residing
permanently in Bangladesh who emigrate to foreign countries, should be treated as blocked. For
blocking the accounts and securities of intending emigrants the Bangladesh Bank will issue necessary
instructions to their banks.

Sometimes Bangladesh nationals who had gone abroad for purposes other than migration take up
permanent residence in a foreign country. As and when such cases of their clients come to the
knowledge of the ADs, it will be their responsibility to report these to the Bangladesh Bank for
instructions as to whether or not the bank accounts/securities of the person concerned should be
blocked' ln such cases pending receipt of instructions from the Bangladesh Bank, the securities

391 l[]n*i:
 Corporute Laws and Practices

should be immobilized and no operation on the bank account should be allowed without its prior
approval.

23. a. Operations on blocked accounts

The Bangladesh Bank may issue special instructions regarding operations on individual blocked
accounts. ln the absence of any such special instruction, no payment into or withdrawal from
blocked accounts may be made unless prior approval of the Bangladesh Bank has been obtained.

b. Use of blocked balance

Balances held in blocked accounts may be invested in "approved securities" expressed to be payable
in Taka or may be placed on fixed deposit with the bank in which the account is held subject to prior
approval of the Bangladesh Bank. The shares or securities in which investment is permitted by the
Bangladesh Bank must be bought through the bank with whom the blocked account is kept and
registered in the name of the account-holder, the address being his permanent residential address
outside Bangladesh. Alternatively, securities so purchased may be registered in the names of the
banks keeping the blocked accounts or their nominees in Bangladesh. The securities may not be held
in bearer form and may not be sold or transferred out of the name of the stock-holder without prior
permission of the Bangladesh Bank.

392 1X)*g*
 Corporate Laws and Practices

SECTION: !V

NON-RESIDENT INVESTOR'S TAKA ACCOUNTS (NITA)

24. (i) ln respect of portfolio Investment in Bangladesh (as mentioned in Para-4, Chapter 9) the non-
resident investor (non-resident person/institutions including non-resident Bangladesh
nationals) shall open a NITA with any AD in Bangladesh, with freely convertible foreign
currency remitted from abroad through normal banking channel or by transfer of funds from
the non-resident investor's foreign currency account, if any, in Bangladesh;

(ii) Balances in the NITA mayfreely be used to buy Bangladeshi shares/securities. These balances
are also freely transferable to the Foreign Currency Account (opened as per instructions at
Chapter 13, Para 1& 2)of the same person with the respective AD as well as remittable abroad
in equivalent foreign exchange. Transfer and outward remittances will be reported to the
Bangladesh Bank in the monthly statements of NITA and returns along with the TM Form
approved by the ADs respectively in terms of this general authorization.

(iii) The NITA can be operated by the account-holder himself or by a nominee, including the AD
itself. Purchase and sale of shares/securities listed in a stock exchange in Bangladesh shall be
made only through a member/registered broker of the exchange.

Purchase of new public issues not yet listed in a stock exchange may, however, be made
directly from the company issuing the stock/security.

(iv) Dividends/interest earnings on the shares/securities bought through the NITA, net of taxes
payable on such earnings of the non-resident holder, received from the issuing
company/institution may be credited to the NITA. ln these cases (unless the payment is
accompanied by a certificate from the issuing company's auditor that the tax payable on the
earning of the non-resident holder has been withheld and the net post-tax amount has been
paid for credit to the NITA) the AD will ensure that an amount representing taxes payable on
the earning of the non-resident holder is withheld from the gross amount received (for
eventual payment to the tax authorities) and only the net post-tax amount is credited to the
NITA.

(v) Sale proceeds of the shares/securities purchased through the NITA (net of taxes payable, if
any, on the capital gain) may also be credited to the NITA. Before crediting the sale proceeds of
the stocks/shares held by the non-resident into the NITA, the AD shall ensure that the tax
payable (if any) on the capital gain is withheld from the sale proceeds for eventual payment to
the tax authorities.

(vi) No local funds from any sources other than those mentioned at (i), (iv) and (v) above can be
credited to NITA.

(vii) The AD must ensure that NITA is debited or credited for purchase or sale of shares at the prices
prevailing in the stock market on the day of the relative purchase/sale.

393 1t':rg*
 Corporate Laws und Practices

(viii) Relevant instructions contained in the Notifications of BSEC regarding placements, allotments
and issuance of right shares/bonus shares are to be meticulously complied with.

(ix) No loan facilities shall be allowed by the ADs in the Non-resident lnvestor's Taka Accounts

(x) lncidental expenses related to sales and purchases of shares/securities and to operation of the
accounts may be debited to NITA.

ln addition to the routine reporting regarding inward and outward remittance to and from the
NITAs in the usual monthly returns, the ADs will furnish monthly statements of transactions in
the NlTAs, as per prescribed proforma (Appendix 5/921to the FEID, Bangladesh Bank, Head
Office, Dhaka. The ADs will also submit with the monthly statements their own
certificates/certificates from the auditors of the concerned companies regarding
payment/withholding or exemption of taxes payable on the capital gains and on
dividend/interest earnings of the non-resident holders, as applicable

394lPage
 Corporate Laws and Practices

CHAPTER 15: BORROWTNG ABROAD BY RESIDENTS

l. Borrowing abroad by private sector industrial enterprises

All proposals for borrowing from abroad by private sector industrial enterprises in Bangladesh
(including supplier's credits, financial loans from institutions or individuals and debt issues in capital
markets abroad) shall require prior authorization of the Bangladesh lnvestment Development
Authority (BIDA). Procedures in details for obtaining such credit facilities have been embodied in the
Notification No. BOI/R&1M1,/4(39)/81(Part)/1209 of Board of lnvestment (BOt, now BtDA) issued on
10th December, 1998 (Appendix 6/1).

Applications as per proforma at the Annexure-A of Appendix 6/1, for approval of proposals for
borrowing from abroad should be submitted to the BIDA with the analyses and supporting
documents.

In each case of supplier's credit/loan from abroad approved by BIDA, a copy of the loan agreement
should be forwarded by the concerned AD to FEPD, FEID & Statistics Department, Bangladesh Bank,
Head Office, Dhaka.

However, short term credit accommodations of up to one year duration from suppliers/buyers
abroad are, however, subject to the guidelines/instructions issued by Bangladesh Bank in regard to
settlements for current commercial transactions.

2. Remittance towards repayment

Repayment installments of interest and principal against the supplier's credits/loans from
abroad
availed of in terms of general/ specific authorization of the BIDA as mentioned in the foregoing para
may be remitted abroad by the ADs without prior reference to Bangladesh Bank provided that:

(i) The amounts of interest and installments of principal repayment are remitted only by
the AD
through whom the foreign credit was originally received;

(ii) ln case of loan received in convertible foreign exchange, the AD while reporting
to Bangladesh
Bank the remittance of interest/principal repayment installment in the usual monthly
return
must furnish a certificate stating the date(s) and amount(s) of receipt of loan funds and
mentioning the monthly returns/schedules in which those receipts were originally reported
to
Bangladesh Bank. A copy of the relevant credit agreement and a copy of the repayment
schedule
should also be forwarded;

(iii) ln case of foreign loan availed of in the form of supplier's credit

the borrower must submit to the
AD the attested copy/copies of bill(s) of entry evidencing actual arrival of the relative
capital
goods in Bangladesh before any installment of interest/principal can
be remitted. Attested
copy/copies of the bill(s) of entry along with copy of the relative credit agreement
and
repayment schedule should be forwarded to the Bangladesh Bank by the AD while
reporting
remittance of installment of principal/interest in the usual monthly returns/schedules.

3951lr*g*
 Corporate Laws and Practices

3. Borrowing abroad by public sector entities

Borrowing abroad by public sector entities requires approval of the Government. All such borrowings
on commercial (non- concessional) terms also require specific approval of the Standing Committee
on Non-Concessional Loan.

4. Guarantee towards repayments of foreign suppliers' credit lssuance of repayment guarantees

against foreign suppliers'credits shall be subject to the instructions at Para 9, Chapter 16.

5. Short term suppliers' credit from abroad

Availing of short term suppliers' credits from abroad in the form of imports under deferred payment
LCs will be subject to compliance with the instructions at Para-33, Chapter 7 (lmport).

6. Remittances towards rePaYment of interest and principal installments against past foreign
loans/su ppliers' credits

Remittances towards repayment of interest and principal installments against past foreign
loans/suppliers' credits availed in terms of specific approvals other than those covered in the
preceding paragraphs (such as past marine vessel procurements under the erstwhile Pay as You Earn
Scheme) will be subject to such prior permission requirement as prescribed in the original approvals,
until and unless decided otherwise by Bangladesh Bank on approach in each case.

l. Medium/long term external borrowing by industrial enterprises in Export Processing

Zones/Economic Zones

The procedure outlined below will be followed in processing medium/long term external borrowing
approval requests of industrial units in lhe EPZslEZs.

(i) lndustrial units in the EPZs/EZs. will submit borrowing approval applications and related
documents as per proforma at Annexure-A, Appendix-6/1 through their nominated Authorized
Dealer banks for onward referral via BEPZA/BEZA to Bangladesh Bank, Head Office. Besides
documentation requirements indicated at Annexure-A, Appendix-6/1, approval application must
also be supported by analyses and papers in regard to: (a) commercial viability of the project (b)
the project's capacity to service the proposed debt from its earnings (c) cost competitiveness of
the project's outputs in domestic and external markets (d) existing domestic output capacity in
the sector to which the borrowing proposal relates, and the potential domestic and external
demand given the estimated output cost structure (e)existing indebtedness structure of the
project sponsors, duly supported by reports of their bankers and of the CIB at Bangladesh Bank.

(ii) AD banks will forward the applications to BEPZAIBEZA, after satisfying themselves about
completeness of the applications and accompanying documents, as also about prima facie
correctness of data/information provided in the applications. While forwarding the applications
onward, the Authorized Dealer banks may add such observations/remarks of their own as they
may deem necessary to make.

(iii) The BE1ZA/BEZA, after perusal of borrowing approval applications forwarded by ADs, will in turn
forward these onward to General Manager, FEID, Bangladesh Bank Head Office, Dhaka; with
such observations/remarks as deemed necessary.

396ltlnE*
 Corporate Luws and Practices

(iv) The borrowing proposals forwarded to Bangladesh Bank by the BEPZA/BEZAw||| be scrutinized at
the FEID. The decisions taken by Bangladesh Bank in this regard will be communicated
simultaneously to the BEPZA/BEZA, the applica nt EPZ/EZ units, and their Ads concerned.

8. Reporting of Foreign Loans approved by BIDA/Bangladesh Bank

The Concerned AD bank through their respective head office will have to submit a consolidated
quarterly statement of all foreign loans (with providing specific information and comment on
utilization of each loan separately) received by their client under the title of 'The euarterly
Statement of Foreign Loan approved by B|DA/Bangladesh Bank to the General Manager, FEID,
Bangladesh Bank through e-mail ([email protected]) in the prescribed format (Appendix 5/93)
within 15 days of the end of the each quarter of a year.

9' Working capital loans from abroad by foreign owned/controlled companies Foreign
owned/controlled industrial enterprises in Bangladesh (as defined in para 44, Chapter 16) having
urgent occasional necessity of short term borrowing for business needs other than inputs
procurements, for which working capital financing from the local market has not yet been lined up,
may access interest free loans from parent companies/shareholders abroad for up to one year
without any prior approval, subject to post facto reporting through their AD banks to FEPD,
Bangladesh Bank Head office within one week of availing each such loan. Repayments of these loans
will likewise require no prior approval, but will have to be reported to FEpD, Bangladesh Bank, Head
office through AD banks besides usual monthly report to Bangladesh Bank.

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 Corporate Laws and Practices

CHAPTER 15: SECTION-1

IOANS. OVERDRAFTS AND GUARANTEES

1. Restrictions on lending

Grant of credit facilities in Taka to non-residents, to companies (other than banking companies)
controlled directly or indirectly by persons resident outside Bangladesh and to residents against
guarantees or collateral lodged outside Bangladesh, the extension of loans and overdrafts in foreign
currencies and the giving of guarantees on behalf of residents of Bangladesh in favor of non-
residents or on behalf of non-residents in favor of residents are all regulated under sections 3,4,5,
18 and 20 of the FER Act., 1947. This Chapter contains the general regulations covering the granting
of such loans, overdrafts, credit facilities and guarantees.

2. Loans and overdrafts to non-resident bank branches and correspondents

The ADs may provide short term credit facilities for a period not exceeding 2 (two) weeks to their
branches and correspondents abroad only by way of overdrafts arising in the latters' non-resident
Taka accounts, if any, on account of negotiation of LCs opened by them for import from Bangladesh.

3. Trading & commercial loans and over drafts

The ADs should not grant Taka loan against overseas guarantees or collateral outside Bangladesh
without prior approval of the Bangladesh Bank. Applications should be made on Form L (See
Appendix 5l94). The applicant is required to state the purpose for which the credit facilities are
required, the period for which the facilities would be needed, the value of his stocks and assets in
Bangladesh and reasons why borrowing against an overseas guarantee or collateral outside
Bangladesh is necessary. The applicant is also required to state in what manner the proposed loan or
overdraft is expected to be paid off.

4. (A). Foreign owned/controlled companies

A company is deemed to be controlled directly or indirectly by persons resident outside Bangladesh-

(a) if it is a branch office of a company incorporated outside Bangladesh;

(b) in the case of partnershiP, if
(i) 50 (fifty) percent or more of the capital of the partnership is owned by foreign nationals or,
(ii) the majority of the partners are foreign nationals; and
(c) in case of companies incorporated in Bangladesh, if
(i) sg(fifty) percent of the shares or more are owned by foreign nationals or,
(ii) so(fifty) percent or more of the directors in the Board of company are foreign nationals. ln
the case of equal share holding or equal representation on the Board of Directors, a

company is deemed to be foreign controlled if its Chairman is a foreign national.

(B) Working capital loans for foreign owned or controlled firms

By virtue of Section 18(2) of the FER Acl, 1947 no person resident in Bangladesh may grant any
loan, advance or credit facility to any company (other than banking company) which is controlled
whether directly or indirectly, by persons resident outside Bangladesh except with the approval

398 1F;:g*
 Corporate Laws and Pructices

of Bangladesh Bank. For the purpose of Section 18(2) of the FER Act, 1947 the word "Company"
includes a firm, branch or office of a company or firm, Pursuant to this provision, Bangladesh
Bank has accorded general authorization to banks for extending to foreign owned/controlled
industrial and trading firms/companies operating in Bangladesh Taka working capital loans
necessary for their operation in due course of business, according to prevailing credit norms and
on the basis of normal banker customer relationship.

Resident persons/companies may purchase Commercial Paper (CP) issued by foreign owned/
controlled companies in Bangladesh for financing working capital in terms of general instructions
of the guidelines issued by Bangladesh Bank in this regard.

General approval has been accorded for purchase by individuals and institutions resident in
Bangladesh of Taka bonds issued with permission of the Bangladesh Securities and Exchange
Commission by foreign owned/controlled companies in Bangladesh.

(c) Term lending in Taka to foreign owned/controlled companies

Foreign owned/controlled companies engaged in manufacturing or services output activities for

three years or longer in Bangladesh can access Taka term loans from the domestic market for
capacity expansion or BMRE regardless of local content in their equity; subject to adherence by
banks/financial institutions to all applicable credit norms and prudential parameters including
single borrower exposure limit, debt-equity ratio and so forth. This is to mention here that total
debt of the firm/company does not exceed the 50:50 debt equity ratio.

The term loan facilities extended will have to be reported post facto to General Manager, FEID,
Bangladesh Bank, Head Office, Dhaka in proforma prescribed at Appendix 5194.Ierm borrowing
proposals not conforming with the stipulations in the above paragraph may as before be
forwarded to General Manager, FEPD, Bangladesh Bank, Head Office, Dhaka for consideration
and specific decision.

ln terms of the above authorization, non-Authorized dealer bank branch(s) or non-bank financial
institutions may provide such term loan in Taka to foreign owned/controlled firm/company only
in association with AD bank branch(s) subject to observance of instructions stipulated above. AD
will ensure the compliance of the relevant instructions for entire financing.

(D) The ADs will maintain and carefully preserve separate company-wise records of loans/ overdrafts
granted to the foreign or foreign controlled companies.

(E) Head Offices/Principal offices of the ADs are also required to submit a consolidated statement
(See Appendix 5/95) as of 31st December each year showing local borrowing facilities allowed to
foreign or foreign controlled companies in Bangladesh to the General Manager, FEID, Bangladesh
Bank, Head Office, Dhaka.

(F) Taka loans to NRBs working abroad

ADs may extend mortgage loans in Taka to NRBs working abroad for the purpose of housing in
Bangladesh subject to observance of the existing guidelines of Prudential Regulations for Consumer
Financing (Regulation for Housing finance) issued by Banking Regulation and Policy Department, and
the following instructions:

399 lionge
 Corporate Luws and Practices

a) The housing finance facility shall be provided to NRBs at a maximum debt equity ratio of 7525.
The equity portion shall be provided by the borrower-NRBs either through their inward
remittances or through debits to their non-resident bank accounts fed by foreign sources.

b) ADs may obtain securities and savings instruments held by NRBs in Bangladesh as additional
collateral beside registered mortgage of the house with registered power of attorney. They may
also obtain third party personal guarantee(s).

c) The repayment against the loans shall be made out of inward remittances. However, rental
income from the house concerned, net of applicable taxes, may be used for repayment. In this
case, ADs may, at their options, provide necessary custodial services to collect rental income.

d) ADs shall adhere to all applicable credit norms, prudential parameters, and applicable
instructions of other competent authorities.

ln case of housing finance facility extended by branches of scheduled banks not Authorized to
deal in foreign exchange, such lending bank branches should have suitable links with Ads
channeling inward remittances for equity and repayment.

5. Loans against commodities intended for export from Bangladesh

a) ADs may grant credit facilities against goods intended for export from Bangladesh to companies
and business houses controlled by persons resident outside Bangladesh without prior approval
of the Bangladesh Bank. Business houses controlled by persons resident outside Bangladesh may
be given credit facilities, without Bangladesh Bank's approval against pledgment of merchandise
like jute, hides and skin which are mainly exported from Bangladesh.

(b) Purchase of usance bills

Purchases by the ADs of usance bills covering imports into Bangladesh result in the payment by
them in foreign currency or a payment in Taka to a non-resident account, whereas, they do not
receive payment for the bills from the importer pending maturity and thus the transactions
result in the extension of credit facilities to the importer in Bangladesh. ADs are free to discount/
purchase accepted usance/deferred bills against import from abroad on banker customer
reiationship and normal banking practices applying due diligence .

6. (a). Private loans/overdrafts against guarantees or collaterals lodged outside Bangladesh

Applications for credit facilities in Taka to any person, whether resident in Bangladesh or
otherwise, for purposes other than trading or commercial against overseas guarantee or
collateral outside Bangladesh should be referred to Bangladesh Bank for prior approval. The
application should be made in Form L (Appendix 5/94)

(b) Taka advance against cheque purchase

Prior Bangladesh Bank approval will however not be required for Taka advances by way of
purchase of cheques in freely convertible currencies drawn by foreign embassies/international
organizations/foreign nationals employed therein on their bank accounts abroad, provided that

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 Corporate Laws and Practices

(i) the Authorized Dealer is fully satisfied about collectability of cheque proceeds in foreign
currency within four weeks of purchase, (ii) the expected collection period is fully factored in
while deciding the purchase price in Taka, and (iii) the purchases are with recourse to drawers of
the cheques for any difficulty in collection.

(c) toan for Investment

No credit facility should be given to foreign nationals for dealings in shares and securities, purchase
of cars etc. without prior approval of Bangladesh Bank. Applications in 'Form L' may in such cases be
forwarded to Bangladesh Bank for consideration.

7. Loans and advances by the ADs in foreign currency

ADs should not grant any loan or overdraft in foreign currencies whether secured or unsecured
except with the prior approval of Bangladesh Bank. Applications for this purpose should be made by
letter giving full details of the purpose for which such loans or overdrafts in foreign currency are
required, particulars of the guarantee or collateral, if any, and the proposed mode of repayment of
the loan or overdraft.

8. Guarantees on behalf of residents in favor of non-residents

ADs may furnish guarantees to non-residents on behalf of residents only within the authority set out
in the following paragraphs:

i) ADs may issue bid bonds/performance bonds on behalf of suppliers in Bangladesh in favor of
international agencies inviting tenders for supply of goods/services. ln such cases ADs should
ensure genuineness of the tender/supply contract/work order etc. before issuing of bond/
gua ra ntee.

ii) Minor Guarantees

ADs may freely give guarantees on behalf of their customers in their ordinary course of business
in respect of missing documents, authentication of signature, release of goods on Trust Receipts
and defects in documents negotiated under LC or otherwise.

iii) Export Guarantees

ADs may furnish performance bonds or guarantees in favor of overseas buyers on account of
Bangladeshi exporters without prior approval of Bangladesh Bank subject to usual banking norms
and the following conditions:

(a) the tender floated by the foreign buyer calls for bank guarantee/performance bond;
(b) the tenderer is a bonafide importer/user/trader of the commodity/product concerned;
(c) there is no export ban in Bangladesh on the commodity/product to be supplied;
(d) the past performance of the exporter is considered satisfactory by the AD.

The remittance, if any, to the beneficiary as a result of invocation of the bond or guarantee can be
made subject to report to the Bangladesh Bank.

401 lilage:
 Corporate Laws and Practices

iv. Umrah Hajj Guarantee

ADs may, on behalf of approved Umrah agents, furnish bank guarantees/performance bonds not
exceeding 2,00,000(Two lac) Saudi Riyal in favor of Official Umrah service agents/providers of
Kingdom of Saudi Arabia (KSA) without prior approval of Bangladesh Bank subject to usual
banking norms and observance of the following conditions:

(a) Applicant agents shall have up to date licenses from the Ministry of Religious Affairs as
Umrah agents. They shall also have valid licenses from the Ministry of Civil Aviation and
Tourism as travel agents and valid Accreditation Certificate from lnternational Air Transport
Association.

(b) ADs shall obtain agreements signed between Bangladeshi bonafide Umrah agents and
official Umrah service agents of KSA.

(c) The past performance of applicant agents is considered to be satisfactory by ADs. The
remittance, if any, to the beneficiary as a result of invocation of the bank guarantee,
performance bond can be made subject to report to Bangladesh Bank with detailed reasons
of the invocation.

9. Repayment Guarantees against suppliers' credit

(a) Except in the cases as mentioned in (b) below, ADs have to take prior permission from FEPD,
Bangladesh Bank before issuing any guarantee on behalf of industrial concerns under
public/private sector favoring foreign suppliers towards repayment of suppliers' credits.
However, providing guarantees like corporate guarantee, personal guarantee, third party
guarantee, etc. to the foreign lenders as stipulations of foreign loan agreement will not require
Bangladesh Bank permission provided the loan concerned has been approved bythe BIDA.

(b) ADs may, on behalf of industrial importers, issue repayment bank guarantees without Bangladesh
Bank approval favoring lnternational lslamic Trade Finance Corporation extending short term
buyers' credit up to 180(one hundred eighty) days for import of industrial raw materials for own
use by importers, on sight basis, subject to adherence to all applicable credit norms and
prudential parameters including single borrower exposure limit. In case of invocation of the
guarantees, ADs shall report Bangladesh Bank giving full details of the circumstances leading to
invocation and copy of bill of entry relevant to the concerned imports.

10. Guarantee on behalf of non-residents in favor of residents in Bangladesh

a) Subject to such conditions as may be imposed by Banking Regulations and Policy Department
from time to time, ADs may issue Taka guarantees on behalf of foreign or foreign controlled
companies/firms operating in Bangladesh in favor of residents in Bangladesh: (i) against 100
(hundred) percent cash deposit and/or where the guarantee is required to be submitted with
tender documents in lieu of earnest money deposit, subject to the condition that validity of the
guarantee issued in lieu of earnest money will be limited to the period within which the decision
regarding acceptance or rejection of the tender is taken, (ii) against adjustment of the amount
from the overdraft limit, if any, allowed to the company/firm concerned.

402 lfragi:
 Corporate Luws and Practices

(b) An AD may without prior approval of Bangladesh Bank, issue guarantee, bid bond or
performance bond in foreign currency on behalf of a non-resident firm/company favoring
residents in Bangladesh provided a back to back guarantee covering the guaranteed amount
from an overseas correspondent or other bank abroad is held by the AD. The AD should satisfy
itself about the bonafides of the overseas guarantee before issuing its own guarantee/bid
bond/performance bond there against. lf beneficiaries in Bangladesh require guarantee in Taka
instead of foreign currency, ADs may issue guarantee, bid bond or performance bond in local
currency against taka equivalent back to back foreign currency guarantee with suitable coverage
for exchange rate fluctuation from counter guarantee issuing banks abroad.

(c) ln all other cases not specified above prior approval of the Bangladesh Bank is required for
issuing guarantees on behalf of non-residents in favor of the residents in Bangladesh.
Applications for these cases should be made by letter in duplicate giving full particulars of the
guarantee/bond, the period, purpose and the method by which the AD will be reimbursed in the
event of the guarantee/bond being invoked.

11. Guarantee favoring local project authorities on behalf of residents.

ADs may issue, on behalf of residents, bid bonds/performance bonds/guarantees in foreign currency
in favor of local project authorities against goods/services procurement tenders financed by
international/foreign donor agencies/Bangladesh Government, on the condition that in case the
guarantee is invoked the claim there against would be paid only in Taka equivalent and not in any
other currency,

12. Guarantee favoring a non-resident on behalf of another non- resident

Non-resident international agencies may demand bank guarantees from non-resident contractors
against supply of materials/down payment for the ongoing projects in Bangladesh financed by them.
Such guarantee on behalf of a non-resident contractor in favor of the non-resident beneficiary may
be issued by an AD against 1O0 (hundred) percent counter guarantee from a reputed international
bank abroad, or against 100 (hundred) percent cash collateral in foreign exchange received from
abroad through banking channel.

13. Guarantee and pledging of collateral in favor of overseas bank branches and correspondents

ADs may not, without prior approval of Bangladesh Bank, furnish guarantees to or hold collaterals on
behalf of overseas bank branches or correspondents in respect of credit facilities or guarantees to be
extended by them or for any other purpose. All applications to Bangladesh Bank should be made by
letters giving details of the purpose for which guarantee is to be furnished or collateral deposited.
Prior approval is not however, necessary in cases where the ADs are satisfied that the amount of the
fixed deposit or other collateral held by them represents funds remitted to Bangladesh through
normal banking channel from the country of residence of the borrower. However, ADs may, without
prior approval of Bangladesh Bank hold collaterals on behalf of overseas bank branches or
correspondents in respect of external borrowing by industrial enterprises as approved by BIDA/BB,

14. Renewals of loans, overdrafts and guarantees

ln cases where the extension of loans or overdrafts or guarantees require prior approval of the
Bangladesh Bank, the renewal of such loans, overdrafts or guarantees shall also require prior
approval ofthe Bangladesh Bank.

403|i}*pr:
 Corporate Laws und Practices

15. LCs to finance imports or exports not barred

Nothing in this chapter shall affect the establishment of LCs in accordance with the provisions of
Chapter 7 and the advice, confirmation and negotiation of credits established by non-resident b3nks
to finance exports from Bangladesh.

16. Obtaining foreign loan by Non-bank Financial lnstitutions (NBFls)

NBFIs operating in Bangladesh licensed under the Financial lnstitutions Act, 1993 may obtain loan
from abroad subject to prior approval of the Bangladesh Bank under the following conditions;

(i) For obtaining such loan, effective rate of interest will have to be consistent with foreign loans
availed of by residents with prior approval of Bangladesh Bank;
(ii) Repayment period (including grace period) will not be less than five years;
(iii) Loan thus obtained (in FC) from abroad shall be used as security to obtain Taka loan from any
bank in Bangladesh. Taka loans so obtained shall be used for lending to 'manufacturing
industries and infrastructure sector (other than real-estate) only. While applying to Bangladesh
Bank for such approval, NBFIs shall submit the following papers/ information with application:
a. Reason for obtaining foreign loan, debt-equity ratio (existing and after obtaining proposed
foreign loan), source and currency of repayment, particulars of security against foreign loan,
particulars of taka loan obtained so far (if any) along with amount, tenure and particulars of
security lodged thereof;

b. Specimen copy of draft loan agreemen!

c Specific information regarding effective interest rate factoring in all fees & expenses,
tenure, rate of down PaYment etc.;

Besides, prior permission from Bangladesh Bank will have to be obtained by NBFIs for obtaining Taka
loan from entities controlled by non-residents like DEG, FMO etc. While applying to Bangladesh Bank
for such loan, it is to be ensured that effective interest rate for proposed loan is competitive with
similar loans availed of by other resident entities during the recent past. Since, interest rates in such
cases are determined by adding premium with Treasury Bill Rate, tenure of Treasury Bill and rate of
premium are to be mentioned separately with such application'

404lPag*
 Corporate Laws and practices

sEcTtoN - il
CREDIT FACILITIES TO INDUSTRIES IN EXPORT PROCESSING ZONES

17' (A) 100 (hundred) percent foreign owned enterprises in the EpZs known as Type A industries
may
obtain short term foreign currency loans from overseas banks and financial institutions subject
to the following conditions:

(i) The loan shall be received through an AD in Bangladesh; and the loan proceeds will be
credited to the FC account maintained by the AD in the name of the Type A unit, to be
used
for financing import of capital machinery and raw materials, payment of interest/service
charges, repayment of loans and for crediting Taka account for meeting local expenses;

(ii) only assets fully owned by the Type A industry may be lodged as collaterals for such loans;

(iii) Repayment of principal and interest on the loan shall be remitted out
of the balances
available in the FC account without prior Bangladesh Bank approval. No fund
may be
provided from the AD's own resources for such repayment except
with prior approval of
Bangladesh Bank;

(iv) ln case the loan is called up by the creditor, the assets charged
to foreign lender will be
allowed to be sold only in foreign exchange and proceeds, after paying
off all local liabilities
in Bangladesh, may be remitted abroad with Bangradesh Bank,s ,ppror.r;

(v) No Taka loan against repatriable short term foreign

currency loan will be allowed to a Type A
ind ustry.

(B) Type A in EPZs may access short term foreign currency loans from parent
industries
companies/shareholders abroad and other Type A subsidiaries/associates
operating in EpZs of
Bangladesh' ln the context of such short term loans within
subsidiaries/associates operating in
EPZs, ADs shall, before transferring the fund, satisfy
themselves that the fund is unencumbered.

(c) Type B industries (joint venture projects) may also obtain

such loans subject to conditions
applicable to Type A industries as indicated above, except that
Type B industries will not be
permitted to mortgage/hypothecate their fixed assets,
raw materials in favor of any nonresident.
The ADs may, however, issue guarantee to overseas banks/
financial institutions for short term
foreign currency loans brought into Bangladesh by Type B industries,
subject to prior approval of
the Bangladesh Bank.

18. Taka loans to Type B units

Taka loan may be granted to a joint venture (Type B) industrial unit in EpZ up to 100 (hundred)
percent of short term foreign currency loan brought
in and encashed to Taka. Loan in Taka for
procurement of capital machinery for setting up
a Type B industry, not exceeding the local partners,
share of ownership of the unit, may be extended on normal
banker-customer relationship.
Repayments of the Taka loans along with interests should
be received out of the foreign exchange
earnings of the unit.

19' ln the case of joint venture (Type B) projects in the EPZs,

the foreign partners will have to arrange
their contributions in foreign exchange from own or borrowed
sources outside Bangladesh and the

405 lilag*
 Corporate Laws and Practices

local partners shall contribute their shares in local currency. ln the event, however, the contributions
as per joint venture project agreements made by the foreign partners and Authorized foreign loan
are not sufficient to cover the cost of machinery and equipment, the shortfall may be made up by
conversion of Taka into foreign currency up to an amount not exceeding the local partners'
shares/contributions and Authorized local loan for procurement of capital machinery as mentioned
in Para 18 of this Chapter.

20. Taka loans to Type C units : ADs may extend credit facilities to Type C industries [100 (hundred)
percent locally owned] as admissible to such industries outside EPZ. Authorized loan received in local
currency and equity may be converted into foreign exchange to settle obligations for importing
capital machinery.

21. Opening of import LCs on account of EPZ units

ln establishing import LCs on account of Type A, B and C units in the EPZs ADs shall bear in mind the
position that the import payments may be made only out of the foreign exchange earnings of the
concerned units or out of their borrowings abroad credited in their FC accounts, and that no funds
from the AD's own foreign exchange resources can be used for this purpose except in the cases as
mentioned in Paras 19 and 20 of this chapter.

Before opening inputs import LC against an export LC or export order received by an EPZ unit the AD
should satisfy itself completely about the clarity of the conditions in the export order/LC, the
standing and credit of the foreign buyer and the ability of the exporting unit for timely execution of
the export order. ln opening inputs import LCs on account of Type B and Type C units, domestic value
addition requirements prescribed for the respective items by the Ministry of Commerce should also
be abided by.

lmport payments against the LCs should be scheduled in a manner that payment obligations do not
fall due before receipt of export proceeds. ln all cases of opening inputs import LCs on accounts of
units in the EPZ, ADs should satisfy themselves that necessary arrangements have been made by the
opener that in case of shortfall or delay in export receipts, foreign exchange would be made available
from external sources.

22. Discounting of accepted usance bills of EPZ units (Type A and B)

Balances in NFCD accounts may be utilized for discounting usance bills drawn by Type A and Type B
units of EPZs for supplying raw materials under back to back (BTB) arrangement and accepted by ADs
operating outside EPZs. However, utilization of NFCD fund for the above purpose including payment
for BTB sight LCs (as mentioned in Chapter 7) will not exceed sO(fifty) percent of total NFCD balance
of the concerned bank.

23. Working capital loan to B and C Type units

For working capital, in addition to pre-shipment non-funded facility through BTB LC and post
shipmentfinancethroughbill discountingasmentionedin para22of thischapter,anADmaygrant
working capital loan from its own source on banker customer relationship considering repayment
capacity of the B and C type units up to the extent of value of inputs required for four months
production. However, loans so advanced should be adjusted from export receivables within shortest
possible time. The amount of importable is to be determined on the basis of export performance of

4061P*g*
 Corporate Luws and Practices

the concerned unit during the previous year while for the new concern the AD should refer to the
production capacity as determined by BEPZA. For Type C units, this facility will include discounting of
direct/deemed export as mentioned in Para 25, Chapter 8 of this Guidelines,

24. Discounting of direct/deemed export bills

Discounting of direct/deemed export bills as mentioned in Para 25, Chapter 8 shall be applicable for
the Type C units of EPZs also under the stipulations mentioned in Para 23 above.

25. Credit facilities to the enterprises of EZs and industries of private export processing zones.

The above instructions of Section -ll shall be applicable for the enterprises of EZs and units of the
private EPZs including KEPZ established under Private Export Processing Zone Act, 1996 also.

26. Medium/long term external borrowing by industrial units in EPZsIEZs

Procedures for obtaining medium/long term external borrowing by industrial units in EPZs/EZs are
described in Para 7, Chapter 15 of this Guidelines.

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 Corporute Laws and Prsctices

CHAPTER 17
sEcTloN-t
FOREIGN EXCHANGE TRANSACTIONS FOR AGENCY SERVICES

1.. Resident persons/firms can work as agents on behalf of foreign principals without prior permission
from Bangladesh Bank. Similarly, no permission is required for encashment of inward remittances
repatriated favoring local agents on account of commission, remuneration, fee, service charges, etc.
Designated ADs, while conducting foreign exchange transactions on behalf of their agent-customers,
shall adhere to following instructions:

(a) ADs shall maintain customer-wise files with updated agency agreements and copies of
licenses/permissions, if applicable, issued by the competent authorities.

(b) ADs shall be satisfied that agents have necessary arrangements with foreign principals to
repatriate their monthly payments. ln case of commission, remuneration, fee, service charges,
etc. to be receivable by agents on transaction basis as per agreements, the payment shall be
repatriated immediately on its closure between foreign principals and concerned persons/firms
in Bangladesh.

(c) ADs shall observe relevant other regulations such as AML/CFT standards, taxes, etc. for executing
foreign excha nge transactions.

2. Foreign exchange transactions on account of agents working in Bangladesh on behalf of foreign

shipping companies, airlines, stock brokerage firms, courier services, railway companies, satellite
channel distributors, tour operators, freight forwarders shall be guided by instructions contained in
different chapters of this Guidelines and subsequent FE Circulars/Circular Letters.

408 lir;*gr
 Corporate Laws und Practices

SECTION-II
TRANSACTION WITH BRANCH OFFICES. LIAISON OFFICES, REPRESENTATIVE OFFICES AND OTHER
PLACES OF BUSINESS IN BANGLAD ES H ESTAB D UNDER SECTION 188(1I OF THE FOREIGN
EXCHANGE REGULATION ACT, 1947.

3. ln terms of section 18B(1) of the Foreign Excha nge Regulation (FE R) Act 1947 ( Vll of 1947), a mended
up to September 09, 2015, person resident outside Bangladesh (whether or not a citizen of
Bangladesh) or a person who is not a citizen of, but resident in Bangladesh or a company (other than
a banking company) not incorporated under any law for the time being in force in Bangladesh shall
report to Bangladesh Bank within 30(thirty) days of obtaining permission from Bangladesh
lnvestment Development Authority (BIDA)or similar competent authority in Bangladesh to establish
in Bangladesh a branch office or liaison office or representative office or any other place of business
for carrying on any activity of a trading commercial or industrial nature.

Accordingly, ADs nominated by branch office or liaison office or representative office or any other
place of business in Bangladesh established under 18B(1) of the FER Act, 1947, shall observe the
following instructions with regards to dealing with such offices:

(a) Nominated ADs shall prepare and maintain a list of their clients of branch, representative, liaison
offices, etc.

(b) Permission from BIDA or similar competent authority for setting up branch/representative/
liaison offices etc. shall have to be reported within 3O(thirty) days of obtaining such permission
to FEID, Bangladesh Bank, Head Office with copy to FEOD, Bangladesh Bank, Head Office or other
offices of Bangladesh Bank (in applicable cases) through the designated ADs of the concerned
office with other necessary documents including encashment certificate, etc.

Moreover, renewals of permissions (if any) shall have to be reported to the above mentioned
departments/offices of Bangladesh Bank within same time period including of those offices who
have already obtained similar permission from Bangladesh Bank or BOI/BlDA.

(c) ln case of change of nominated ADs, branch, representative, liaison offices, etc. shall collect a no
objection certificate from the current nominated bank for onward submission to new nominated
bank. lnformation related to change of nominated bank shall have to be intimated to FEID, FEOD
and concerned office (in applicable case) of Bangladesh Bank.

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SECTION-Ill: FOREIGN EXCHANGE TRANSACTIONS OF FREIGHT FORWARDERS

4. Multimodal transport agencies named as freight forwarders licensed by Customs Authorities will
adhere to the following instructions in addition to those mentioned in Chapter L0 & Section Vl,
Chapter 13, relevant to their operations :

(A) Licensed freight forwarders may pay freight charges to airlines/shipping companies in Taka in
respect of exports made on FOB basis subject to observance of the following terms and
conditions:

(a) Freight forwarders will provide encashment certificates (Appendix-5/96) issued by the
designated AD bank of the concerned freight forwarder to airlines/shipping companies in
support of freight charges recovered from the overseas importer through their counterpart
freight forwarders abroad and repatriated the same to Bangladesh through normal banking
channel. Ads shall issue encashment certificates in support of inward remittances as per
Appendix-5/96 and instructions therein.

(b) Transactions of a licensed freight forwarder shall be channeled through one AD bank branch
designated by it. ln case of changing AD bank, the relevant file of licensed freight forwarder
shall be transferred direct to new AD bank branch with immediate intimation to FEOD, Head
office or other concerned offices of Bangladesh Bank.

(B) ADs may, in addition to charges against imports on FOB basis, effect outward remittance on
account of profit share/service charges payable to counterpart freight forwarders.

(C) Licensed freight forwarders shall arrange with their foreign counterpart freight forwarders to
receive their receivables in such a manner so as to match the credit line extended to them by
airlines/shipping companies locally. The same arrangement shall be made with importers for
settlement of charges with counterpart freight forwarders against FOB imports.

(D) Freight forwarders shall, through their designated ADs, report (as per Appendices-5/97,5/98 &
5/99) their transactions to FEOD, head office/respective area office of Bangladesh Bank by 20th
day at the close of the month.

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CHAPTER 18: SECTTON-l

INSURANCE BUSINESS

t. General:

Foreign exchange regulations governing insurance business entered into and completed in
Bangladesh are set out in this chapter. Branches and agencies in Bangladesh of insurance companies
whose head offices are situated abroad are, from foreign exchange regulations viewpoint, regarded
as resident in Bangladesh and are subject to the-same instructions as insurance companies
registered in Bangladesh.

Life !nsurance

2. Types of policies which may be issued : (i) lnsurance policies on the lives of residents of Bangladesh
may be issued only in Taka. (ii) Existing Taka life policies may not be converted into foreign currency
policies except with the prior approval of the Bangladesh Bank. Similarly, the records of an existing
Taka policy may not be transferred to an office outside Bangladesh.

3. Collection of premia:

(i) Premia on Taka policies on the lives of non-residents may be accepted in Taka if made by
cheques drawn on a non-resident Taka account with an AD or if made out of funds remitted from
abroad by the policy-holder through an AD.
(ii) Premia collected on Taka policies must be credited to the insurance company's resident account.
The remittance of such collections by the branches of non-resident companies to their overseas
head office or branches is not permitted.

4. Assignments: Policies may not be assigned by a resident in Bangladesh to a non-resident or by one

non-resident to another non-resident in a different country without the prior approval of the
Bangladesh Bank. There is, however, no objection to technical assignments of life policies to the
head offices of overseas insurance companies as security for Taka loans granted by the branch in
Bangladesh.

5. Payments of claims

(i) The maturity proceeds or surrender value of Taka policies will be paid in Taka only.

(ii)The proceeds at maturity of Taka endowment policies or annuities held by foreign nationals
who
are temporarily resident in Bangladesh or who having been temporarily resident in Bangladesh
have left Bangladesh, may not be transferred for payment outside Bangladesh without the prior
approval ofthe Bangladesh Bank.

6. The foreign currency policy abroad

Bangladesh nationals may buy life insurance policies in foreign exchange while residing
abroad. on
their permanent return to Bangladesh they may continue to pay the premia from forelgn currency
accounts maintained in Bangladesh. Remittance facility may also be allowed for premia payments
provided:

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 Corporate Laws and Practices

(a) The foreign currency policy abroad was taken while the policy- holder was resident abroad;
(b) Nominee or assignee of the policy is a resident;

(c) The holder furnishes undertaking that the proceeds of the policy will be received in

Bangladesh through normal banking channel;

(d) Declaration is furnished by the applicant as per proforma at Appendix 511'OO;

(e) The AD shall keep note of maturity date of the policy and inform Bangladesh Bank about
non-repatriation of proceeds of the policy at maturity immediately in any such case.

7. Export of policies

Life and endowment policies which fall within the definition of securities cannot be taken or sent
out
of Bangladesh without the prior approval of the Bangladesh Bank. Applications for export of life
policies should be made to the Bangladesh Bank giving full description of the policy and reasons for
its export.

Non-Life Business

8. Marine policies-exports

Exporters in Bangladesh may obtain insurance cover for shipments on CIF basis, the policies may be
expressed in Taka or in foreign currency. For FOB/CFR export shipments, the insurance covers are
arranged by the overseas buYers'

9. (i) Marine policies-imports :

(i) Exports from and imports into Bangladesh under the public sector are required compulsorily to
be insured with the Sadharan Bima Corporation (SBC). Private sector exporters and importers
may take out policies from sBC or from any approved private sector insurance company in
Bangladesh.

(ii) The insurance policies on account of imports into Bangladesh should be expressed in Taka except
that in case of imports for projects/industries which are financed by foreign loans/grants,
policies may be expressed in foreign currency if the terms of the loans/grants so require.

(iii) Marine policies-coastal shipments Coastal shipments between places in Bangladesh may be
insured only in Taka.

10. (a) lnsurance cover on non-marine risks (excluding life) inside Bangladesh may be issued only
in

Taka. Nothing in this paragraph shall affect the operation of the warehouse to warehouse
clause

in marine insurance Policies,

(b) lnsurance cover on assets outside Bangladesh owned by residents of Bangladesh may be issued
in Taka or in the currency of the country in which the assets are situated'

(c) Insurance of baggage and valuables in transit

lnsurance of baggage and valuables in transit is subject to the same regulations as applicable
to
marine insurance Policies.

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 Corporate Laws and Practices

11. (i) Currency in which policies may be issued for non-marine : Claims on foreign
risks (excluding life)
currency policies may be paid to non- resident beneficiaries in the currency in which the policy is
issued. Where a remittance from Bangladesh is required for this purpose, an application must be
made to the Bangladesh Bank on Form TM accompanied by a declaration as per Appendix 5/73.

(ii) Currency in which policies may be issued-other risks: Claims on foreign currency policies whose
beneficiaries are residents of Bangladesh may ordinarily be paid in Taka. Where the beneficiary
requires payment in the currency of the policy, permission from Bangladesh Bank should be
applied for on Form TM accompanied by declaration as per Appendix5/73. The beneficiary must
explain in the declaration why payment in foreign currency is required.

(iii) All risks insurance : All risks insurance policies on the assets of residents may be issued only in
Taka.
(iv) Householders policies : Householders policies can be issued only in Taka.
(v) Personal accident insurance policies : The issue of personal accident policies is subject to the
same conditions as life policies.
(vi) Policies under the Workmen's Compensation Act and Merchant Shipping Act : Policies under the
Workmen's Compensation Act and Merchant Shipping Act can be issued only in Taka.

12. (i) Method of collection of premia on (non-life business) Taka policies : Premia on Taka policies of
non-residents may be accepted in Taka if made by cheque drawn by the non-resident policy
holder on his non-resident Taka account with an AD or if the payment is remitted from abroad by
the policy holder through an AD, lnsurer should not accept payment in Taka from resident
accounts in such cases.

(ii) Premia collection : Foreign currency policies : Premia on foreign currency policies issued by the
lnsurance Companies in respect of foreign nationals resident in Bangladesh can be collected out
of remittable Taka funds of the policy holder or through a remittance received from abroad. ln
respect of foreigner residing abroad the premia can be collected only through remittance from
abroad.

13. Method of settlement of claim (non-life business): Claims against Taka policies can be paid in Taka
only, regardless of whether the beneficiary is a resident or otherwise.

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 Corporate Laws and Pructices

SECTION -II
REINSURANCE

14. Remittance facilities for reinsurance (non-life) abroad will be allowed to the insurance companies
operating in Bangladesh by ADs without prior Bangladesh Bank approval subject to the following
conditions:

(i) Remittances of Premia-Facultative Reinsurance:

(a) Application for this purpose should be made on Form TM accompanied by a declaration in

the form given in Appendix 5hO1'.

(b) The application is supported by evidence in the nature of cover note etc., in respect of
reinsurance effected.
(c) ln case of applicant insurance companies other than the SBC, a certificate from SBC that the
applicant has fulfilled the requirement of obtaining reinsurance cover through SBC to the
extent statutorily prescribed.

(ii) Settlement of Account- Treaty Reinsurance: (a) The application is supported by a proforma
statement of account signed by the Manager of the applicant company or an officer holding a
power of attorney and duly confirmed by the reinsurer. (b) The applicant company has
submitted quarterly statements of its reinsurance account to the FEOD, Head office or other
offices of Bangladesh Bank through the AD (c) Proceeds certificate in case any amount of claim
has been received in cash and the same is being accounted for through the statement of
accou nt.

(d) Applications for this purpose should be made on Form TM accompanied by a declaration in
the form in Appendix 5/1'02.

15. Reinsurance -life : remittance of premia Remittance of premia towards reinsurance of life business
done by an insurance company in Bangladesh under treaty arrangement with foreign reinsurers may
be allowed by the ADs on application in TM Form along with declaration as per Appendix 5/1'02
subject to:

(a) Submission of Bordereaux.

(b) Furnishing of undertaking by the insurance company to repatriate receipts in settlement of
claims under the reinsurance through an AD.
(c) A proforma statement of account signed by the Authorized official of the insurance
company,

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CHAPTER 19
PAYMENT THROUGH INTERNATIONAL CARDS

L. lnternationalcards

Payment in foreign exchange may be made through international card (debit/credit/pre-paid as the
case may be) of internationally recognised issuing company against the following entitlements:

i) Balance in exporters'retention quota account IRef :Para27, Chapter 13] and FC accounts of
EPZ units (Para 30, Chapter 13) & FC accounts of EZ units (Para 4, Chapter 20)

ii) Annual personal travel quota entitlement of individuals [Ref : Para 1, Chapter 12].
iii) Balances held in RFCD accounts IRef : Chapter 13, Section-lll].

iv) Foreign exchange entitlement (fixed by the Government for each person intending to perform
Hajj) of approved private Hajj Agencies for meeting food/lodging expenses of the pilgrims in
Saudi Arabia. [Ref: Para 10, Chapter 12].

v) Personal entitlement fixed by the Government of Bangladesh in each year for intending pilgrims
for performing Hajj I Ref : Para ]-0, Chapter 121.
vi) Foreign exchange entitlement fixed by the Ministry of Finance/competent authority for official
or semi-official visits abroad by the officials of Government/Autonomous/Semi-autonomous
institutions etc. IRef: Para 3, Chapter L2].
vii) Per diem foreign exchange entitlement for private sector participants for attending seminars,
conferences, workshops, training etc. abroad arranged by recognized international bodies [Ref :
Para 4, Chapter 121.

viii) Annual business travel quota [Ref: Para 7, Chapter 12].

ix) Balances held in private foreign currency accounts [Ref : Para nos. 1, 2 and 6, Chapter 13].

x) Remittance facilities for BASIS member lT/Software firms within the limit in a calendar year [Ref
: Para 39, Chapter 101.

xi) Payment of of foreign professional and scientific institutions, both for

membership fees
individual and corporate in Bangladesh, fees for application, registration, admission,
examination (TOEFL, SAT etc.) in connection with admission into foreign educational institutions
IRef: Para 9, Chapter L1.,Para 36, Chapter 10].
xii) Remittance for lT expenses IRef. Para 40, Chapter 10].

xiii) Payment for visa processing fees [Ref. Para 11(B), L2, Chapter 11].

xiv) lnternational cards for individual developers/freelancers IRef : Para 23(b) (3), Chapter 8].

lnstructions relating to issuance of international cards are outlined below

2. lnternational credit/debit/pre-paid card against balances held in ERQ accounts

(a) lnternational credit/debit/pre-paid cards may be issued against the balances held in the ERQ
foreign currency account as per entitlement mentioned in Para 27, Chapler 13 of this Guidelines.
lnternational cards may be issued in favor of up to three (3)top level executives of an exporting
firm/organization holding ERQ accounts. An exporting firm/organization may avail of the card

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 Corporate Laws and Practices

facility from one card issuing bank only. lt will be up to the card issuing bank to accept or decline
a request from an ERQ account holding exporting firm/organization for issuance of international
cards. Cards issued against ERQ accounts may be used only for meeting the bonafide business
purposes of the exporting firmf organization as mentioned in Para 28(AXi), Chapter 13 (Section-
lV)of this Guidelines.

(b) lnternational debit/pre-paid card against balances held in FC accounts of EPZ & EZ companies

To facilitate business travel abroad by officials of enterprises located in EPZs/EZs, balances of FC

accounts as mentioned in Para 30, Chapter 13 and Para 4, Chapter 20 may be used through
international debit/pre-paid cards also. lnternational cards (debit/pre-paid) may be issued in
favor of up to three (3) top level executives of concerned enterprise against balances held in
such foreign currency accounts. An enterprise may avail of the card facility from one card issuing
bank only.

3. lnternational credit/pre-paid card against trave! quota entitlement.

ADs may issue international credit/pre-paid card against the annual personal travel quota
entitlements of the prospective card holders as per Para 7, Chapter L2 of this Guidelines. While
issuing card, the AD shall endorse on the passport, the value for which the card is issued. The same
shall be reported to 'Online Foreign Exchange Transactions Monitoring System' of Bangladesh Bank
as mentioned in Para 1(vi)(c), Chapter 12. ADs are advised to establish effective control to ensure
utilization of foreign exchange issued for (1) SAARC countries &
Myanmar and (2) Other than SAARC countries & Myanmar in the respective areas.

4. lnternationalcredit/debit/pre-paid card against balances held in RFCD accounts

lnternational credit/debit/pre-paid card may be issued against the balances held in RFCD accounts
opened and maintained as per instructions mentioned in Chapter 13 (Section lll)of this Guidelines by
Authorized dealers in Bangladesh.

5. lnternational pre-paid card against Hajj entitlement ( for private sector Hajj agencies) ln each year
government declares general permission for releasing foreign exchange favoring private sector Hajj
agencies to meet food, lodging etc. expenses of the pilgrims in SaudiArabia against foreign exchange
entitlement fixed for each individual. Foreign exchange within the approved limit under general
authorization may be issued in favor of approved private sector Hajj agencies operating in
Bangladesh by the ADs in the form of pre-paid card besides cash/TC/FDD/FTT under the following
arrangements:

(a) Hajj pre-paid card as issued within the said entitlement fixed by the Government for the
respective year shall be used in Saudi Arabia only. Unused balance (if any) shall be encashed into
Taka after return to Bangladesh and the card will be invalidated;

(b) The ADs shall have to be satisfied that endorsement of the same entitlement has not already
been made/will not be made on the pilgrim pass/passport by another AD. While issuing the card,
the AD shall endorse an amount not exceeding Hajj entitlement (as fixed by the Government) on
the pilgrim pass/passport.

416lFagc
 Corporate Laws and Pructices

6. lnternational prepaid card against Hajj entitlement (for individuals) lnternational prepaid card may
be issued to intending pilgrims (individual resident Bangladesh Nationals) for meeting expenses in
Saudi Arabia while performing Hajj as per entitlement declared by the Government in each year
IPara 10, Chapter 1-2lfor using in Saudi Arabia only. While issuing the card, the AD shall endorse an
amount not exceeding Hajj entitlement (as fixed by the Government) on the passport/pilgrim pass.

Hajj pre-paid card as issued within the said entitlement fixed by the Government for the respective
year shall be used in Saudi Arabia only. Unused balance (if any) shall be encashed into Taka after
return to Bangladesh and the card will be invalidate

7. lnternational credit/pre-paid card against govt. officials etc.

lnternational credit/pre-paid card may be issued favoring officials of government/autonomous/

semi-autonomous institutions etc. for official/semi official visits abroad against foreign exchange
entitlement fixed by the Ministry of Finance/competent authority from time to time as mentioned in
Para 3, Chapter 12 of this Guidelines. ln such case, the prospective card holder shall be required to
submit the letter of sanction for limit of foreign exchange and the competent authority's order
authorizing the travel. While issuing the card, the AD shall endorse an amount not exceeding the
entitlement (as fixed by the government/competent authority) on the passport.

8. lnternational credit/pre-paid card for private sector officials.

lnternational credit/pre-paid card may be issued favoring private sector participants for attending
seminars, conferences, workshops, training etc. abroad arranged by recognised international bodies
as per entitlement mentioned in Para 4, Chapter 12. While issuing the card, the AD shall endorse an
amount not exceeding the entitlement as stated in the above mentioned Para on the passport.

9. lnternational credit/pre-paid card for business travel quota entitlements for exporters,
manufacturers for domestic markets and importers. lnternational credit/pre-paid card may be issued
favoring exporters, importers and producers for the local market as per entitlement mentioned in
Para 7, Chapter 12. While issuing the card, the AD shall endorse an amount not exceeding the
entitlement as stated in the above Para on the passport.

10. lnternational debit/pre-paid card against private foreign currency accounts lnternational debit/pre-
paid card may be issued against the balances held in private foreign currency accounts (accounts
opened and maintained as per Para nos. 1, 2 & 6, Chapter, L3).

11. lnternational credit/pre-paid cards for BASIS member lT/software firms

Within the total limit of USD 30,000(thirty thousand) per calendar year, (as mentioned in Para 39,
Chapter 10) ADs may issue international credit/pre-paid card favoring a nominated official of
lT/software firm for up to the limit of USD 6,000(six thousand) with the recommendation of BASIS.
The card may be refilled for another USD 6,000(six thousand) subject to production of documents
evidencing the fact that the previous transactions were carried out for the purposes mentioned in
Chapter 10, Para 39. ADs shall ensure that the aggregate amount of refills of lC and outward
payment through other means do not exceed USD 30,000(thirty thousand) in a calendar year as
stated in the said Para of Chapter L0.

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 Corporate Laws and Practices

12. lnternational cards for online payment of membership fees, etc.

lnternational cards may be used for online payment through internet of membership fees of foreign
professional and scientific institutions, both for individual and corporate in Bangladesh, fees for
application, registration, admission, examination (TOEFL, SAT etc.) in connection with admission into
foreign educational institutions as mentioned in Para 9, Chapter L1-, Para 36, Chapter 10 of this
Guidelines. lndividuals not holding international cards in their names may also make such online
payment through internet using 'virtual card' for the required amount by international card issuing
banks, for use through designated bank branches.

13. Virtual (debit/credit/pre-paid) card for lT expenses

lnternational Card issuing banks have been allowed to issue 'Virtual Card' to individual
developers/freelancers of mobile Apps and Games having acknowledgements/training/
bootcamps/hackathons/course participation certificates on mobile application development,
maximum USD 300 in a calendar year as mentioned in Para 40, Chapter 10 of this Guidelines.

14. lnternational cards/virtual cards for visa processing fees

Remittance on account of visa processing may be made through online using lnternational Cards, as
mentioned in Para 11(B) & 12(visa processing), Chapter L1 of this Guidelines. lnternational Cards
issuing banks may also issue Virtual Cards for individuals not holding lnternational Cards to facilitate
the online payment of visa processing fees.

15. lnternational cards to individual developers/freelancers

ADs may issue international cards to individual developers/freelancers to credit their proceeds
received from abroad against ITE services provided by them. lssuance, crediting proceeds and
utilization of balances of such cards are described in Para 23(bX3), Chapter 8 which are to be
followed meticulously.

15. Online hotel booking using international cards on internet

lnternational cards issued under different entitlements as mentioned in Para l- of this chapter may
also be used for online hotel booking by the cardholders in case of travel abroad.

17. Use of international cards for online payment

ADs may allow their cardholder customers to use lC for online payment not exceeding USD 300 (US
Dollar three hundred) or its equivalent at a single transaction against legitimate purchase of items of
goods and services (such as downloadable application software, e-books, etc.), magazine/newspaper
subscription fees from reputed and reliable sources abroad. Online payments for such purchases
shall be limited to the available unused annual travel quotas of the lC holders plus an additional
amount not exceeding USD L000 (One thousand) annually. lt will be the responsibility of the lC
holders using the online purchase option to fulfill tax/vat payment obligations, if any; they should
also undertake such transactions with due caution against risks being defrauded by unreliable
unscrupulous vendors.

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 Corporate Laws and Practices

18. Payment of mobile phone roaming bil!

Subject to entitlement in each of the categories mentioned above, lnternational Card holder may pay
their mobile phone roaming service utilization bill to mobile phone operators in Bangladesh through
lnternational Card. For realization of roaming bills, the mobile phone operators are advised to specify
the followings in their bills:
i) category of area (SAARC/Non-SAARC including Myanmar);

ii) name of the country;

iii) amount of security deposit of the customer (if any, specifying area and country as above)
19. Other instructions
The following requisites, instructions etc. shall have to be meticulously complied with while issuing
such international cards;

i) A declaration from the intending card holder stating that he is not availing himself of any
lnternational Credit/Debit/Pre-paid Card from any other AD against the same account or the
same entitlement;
(ii) ln case the card is issued by a bank against any ERQ/RFCD/FC account maintained in another
bank, an authorization has to be obtained from the prospective card holder allowing the card
issuing bank to have lien and debit authority for the said account from the bank maintaining that
accounU

(iii) Effective control system must be ensured by the issuing bank to guard against unwanted
drawings in excess of the entitlement or balance in the respective foreign currency accounts (as
the case may be). To facilitate monitoring towards limiting the liabilities on account of card use,
the FC account holding ADs may from time to time advise the card issuing bank about the credit
balances of the FC account;
(iv) The cards shall have to be withheld/invalidated as soon as the fund available in the
ERQ/RFCD/FC account is fully utilized/exhausted unless there is reasonable prospect of
replenishment;
(v) ln cases of issuances of lnternational Cards against ERO/RFCD/FC accounts, the amount of the
respective card shall be under lien so that under no circumstances related account is overdrawn.
Yet for any unforeseen reason, if any account becomes overdrawn at any point of time, the same
shall have to be immediately reported to the Bangladesh Bank clarifying the reason and remedial
measure thereof;
(vi) All records, documents, account statements relating to issuance and use of cards should be kept
ready and available for inspection /examination by Bangladesh Bank as and when required.
20. Reporting
a. Head Office/Principal Office of ADs are required to submit monthly statement of lnternational
Card to FEOD Head office, Bangladesh Bank as per format given in Appendix 5/1,03.

b. Online reporting

lnformation regarding issuance of international cards utilization thereof are required to be

reported to 'Online lnternational Card Monitoring System' of Bangladesh Bank.

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 Corporute Laws and Pructices

CNRPTER 20 : FOREIGN EXCHANGE TRANSACTIONS BY THE ENTERPRISES OF ECONOMIC ZONES (EZS)

IN BANGLADESH.

L. lntroduction
By a ngladesh Econom ic Zones Act, 2010 (Act No' 42 of 201-01,
n Act of the Parliament, na mely 'The Ba

Economic Zones (EZs) are being established in different areas of Bangladesh including backward and
underdeveloped regions under the supervision of the Bangladesh Economic Zones Authority (BEZA).
The broad features relating to the operations of the enterprises in the zones will be published by
BEZA. Broad features of foreign exchange regulations relating to the operations of enterprises of EZs

are being enumerated in the following paras :

2. Enterprises of EZs and their Category

Throughout this chapter, enterprises of EZs will mean industrial enterprises established in different
EZs and will also include developers and other service providing enterprises exclusively formed and
registered to serve a particular EZ.For foreign exchange regulatory purpose, enterprises of EZs shall
be categorized in three types as follows:

(a) 'Type A': 100(hundred) percent foreign owned including those owned by Bangladeshi nationals
ordinarily resident abroad;
(b) 'Type B': Joint venture between foreign investors and Bangladeshi entrepreneurs resident in
Bangladesh;

(c) 'Type C': 100(hundred) percent owned by Bangladeshi entrepreneurs resident in Bangladesh.

3. (i) Foreign lnvestment in EZs

Foreign investors are free to invest inEZs, subject to registration with BEZA. Foreign investment
in EZs (in 'Type A'and'Type B' Units) shall have to be reported to FEID, Bangladesh Bank within
14 (fourteen) days of issuance of shares favoring non-resident investors as per instructions
mentioned in Para 2, Chapter 9 of this Guidelines. Such investment shall have to be reported to
Statistics Department, Bangladesh Bank also as mentioned in Para 25, Chapter 2, GFET (Volume
2) and subsequent circulars/circular letters. Similarly, transfer of shares of the companies not
listed in the stock exchanges, from resident to non-resident, non-resident to resident and non-
resident to non-resident shall have to be reported to Bangladesh Bank including additional
documents mentioned in Para 2 (B), Chapter 9 of this Guidelines.
(ii) Temporary Non-Resident Taka Account for foreign investors : ADs may open Non-Resident Taka
Account (NRTA) in the name of the proposed company/enterprise of foreign investors
contemplating to invest in Bangladesh without prior approval of Bangladesh Bank as mentioned
in Para 2(C), Chapter 9 of this Guidelines.

4. Maintaining FC Accounts and Taka Accounts by Enterprises of EZs

Enterprises of EZs shall maintain FC accounts without prior permission of Bangladesh Bank as
mentioned in Section V, Chapter 13 of this Guidelines with ADs. 'Type A' enterprises may also open
and maintain such accounts with Offshore Banking Units (OBUs) of scheduled banks of Bangladesh.
proceeds from exports of goods or providing services by enterprises of EZs shall be retained and used
through such FC accounts in accordance with instructions as mentioned in Section V, Chapter 13 of
this Guidelines. Besides, equity from foreign shareholders and loan received in foreign currency from
Authorized sources may be credited in such FC accounts of 'Type A' and 'Type B' enterprises of EZs. ln
case of inward remittance on account of equity, Ads may issue a certificate (Appendix 5/39 or 5l4O

420 11'ag*
 Corporate Laws and Practices

as the case may be ) with the amount credited in FC account mentioning equivalent Taka as
mentioned in Para 2, Chapter 9. Moreover, Authorized external loan proceeds may be credited in FC
accounts of 'Type C' units of EZs. Enterprises of EZs may open and maintain Taka accounts in the
same manner as mentioned in section v, chapter 1"3 of this Guidelines. However, developers and
other service providing enterprises as mentioned in Para 2 of this Chapter may, at the request of the
industrial enterprises, receive service charges/fees either in FC or BDT (subject to authorization by
BEZA) for crediting the concerned accounts as the case may be as mentioned above. This is to
mention here that all foreign currency and local currency payment obligations of EZ enterprises shall
be met from FC accounts and BDT accounts of the enterprise concern respectively as mentioned
above. Balances of such FC accounts may be used through lnternational Cards as mentioned in Para
2(b), Chapter 19.

5. Export/Selling of goods frorn EZs

Selling of goods from EZ to abroad and to other places of Bangladesh through LC or contract
(including sales within EZ, to other EZs, to EPZs, to other areas of Bangladesh) shall be treated as
exports. Exports from EZs (abroad/within Bangladesh) are subject to the usual requirement of
declaration of exports in 'EXP Form' and repatriation of export proceeds mentioned in Chapter 8 of
this Guidelines. For identification, EXP Forms for these exports should be rubber stamped or over
printed with words "EXPORT FROM EZ" in bold letters. Portion of proceeds in FC received from
export of goods or providing services may be retained in FC accounts in the name of the EZ units in
the same manner as mentioned in Section V, Chapter 13, of this Guidelines.

6. Selling of Bangladeshi goods or raw materials or non-physical contents to enterprises of EZs Selling of
permissible Bangladeshi goods or raw materials to enterprises of EZs through LC or contract shall be
against convertible FC only to be received fromFC accounts maintained by the enterprises of EZs
with ADs (also OBUs for 'Type A' enterprises) as mentioned above subject to compliance with other
relevant instructions issued by BEZA, National Board of Revenue and Ministry of Commerce. Selling
of goods including non-physical contents to enterprises of EZs against payment in FC shall be treated
as exports from Bangladesh within the purview of Foreign Exchange Regulation Act, 1947 (as
amended up to September 09, 2015). Therefore, normal foreign exchange regulations concerning
declaration of exports on 'EXP Forms' in case of export in physical form and repatriation of proceeds
shall be applicable for exports to EZs from other areas of Bangladesh.

7. lmport by enterprises of EZs

For import from abroad by the enterprises of EZs through LC or contract, usual IMP Form reporting
procedures will, however, be applicable as mentioned in Chapter 7 of this Guidelines. For using
foreign exchange fund from AD, instructions as mentioned in Para 21, Section-ll, Chapter 16 of this
Guidelines shall be applicable for enterprises of EZs. However, 'Type C' enterprises of EZs shall be
allowed to obtain foreign exchange from ADs to settle obligations for importing capital machinery by
the conversion of equivalent amount of equity and/or Authorized loan received in local currency.
Similarly, 'Type B' enterprises may be allowed to convert their local equity/Authorized loan received
in local currency into foreign exchange to settle obligations for importing capital machinery if
equity/Authorized foreign loan received from abroad falls short to meet such obligations.

8. Credit Facilities
For obtaining short term credit facilities from abroad (including from parents, associates or
shareholders), other associates in Bangladesh, other banks in Bangladesh (both long and short term,
asthe case may be) bythe enterprises of EZs, instructions mentioned in Section-ll, Chapter j-6 of this

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 Corporate Lutrys and Practices

Guidelines shall be applicable. However, for obtaining medium and long term debt from
abroad/OBUs of scheduled banks in Bangladesh by the enterprises of EZs, applications for borrowing
approvals shall have to be submitted to Bangladesh Bank through BEZA following the procedures as
mentioned in Para 7, Chapter 15 of this Guidelines.

9. Repatriation of dividend to non-resident Shareholders of 'Type A' and 'Type B' enterprises of EZs

ADs (also OBUs for 'Type A' enterprises) may remit dividends favoring non-resident shareholders of
'Type A' and 'Type B enterprises of EZs without prior permission of Bangladesh Bank subject to
observance of the instructions stipulated in Para 31, Chapter 10 of this Guidelines. However,
submission of documents to Bangladesh Bank as mentioned in 31(e), Chapter 10 for post facto
checking will not be required though usual reporting, online returns etc. shall be submitted by
ADs/OBUs.

10. Repatriation of disinvestment proceeds by non-resident shareholders Sales proceeds of shares held
by non-resident investors of EZ enterprises listed with the stock exchange(s) may be repatriated
without prior approval of Bangladesh Bank following the instructions mentioned in Para 3(A),
Chapter 9. Repatriation of sales proceeds of shares held by non-resident investors of EZ enterprises
not listed with the stock exchange(s) may be effected with prior permission of Bangladesh Bank as
mentioned in Para 3(B), Chapter 9.

L1, Repatriation of royalty, technical know-how and technical assistance fees ADs (also OBUs for 'Type A'
enterprises) may remit the royalty, technical know-how and technical assistance fees of enterprises
of EZs from their FC accounts without prior permission from Bangladesh Bank or BEZA if the total
fees and other expenses connected with above mentioned purposes do not exceed the following
limits:
(a) for new projects, not exceeding 6 (six) percent of the cost of imported machinery;

(b) for ongoing concerns, not exceeding 6 (six) percent of the previous year's sales as declared in the
income tax returns.

However, remittance of such fees in excess of the prescribed limit is subject to prior specific
approval from BEZA. Besides usual reporting to Bangladesh Bank, each transaction shall have to
be reported to BEZA also.

12. Working in EZs by foreign nationals Foreign nationals working in EZs (with valid work permit issued
by BEZA) and who have an income in Bangladesh are permitted to make monthly remittances to the
country of their domicile out of their current savings up to 75 (seventy five) percent of their net
income as mentioned in Para 8, Chapter 11. They are also permitted to remit 100 (hundred) percent
of leave salary, actual savings and all pension benefits without prior Bangladesh Bank approval as
mentioned in Chapter 11 of this publication.

13. Reporting
ADs shall report all foreign exchange transactions of enterprises of EZs through 'Online Foreign
Exchange Transaction Monitoring System' of Bangladesh Bank. Such transactions are also to be
reported in monthly returns to Statistics Department, FEOD and other concerned office of
Bangladesh Bank in relevant Statements (S-10 and S-11-), Schedules, etc. as mentioned in Para 1-4,
Chapter 02, GFET (Volume 2).

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APPENDIX I

Foreign Exchange Regulation Acl, 1947

(Vll of 1947)

FOREIGN EXCHANGE REGULATION ACT,1947 ACT NO. VII OF 1947

11TH MARCH, T947

(Amended up to September 09, 2015)

An Act to regulate certain payments, dealings in foreign exchange and securities and the import and
export of currency and bullion.

WHEREAS it is expedient in the economic and financial interests of Bangladesh to provide for the
regulation of certain payments, dealings in foreign exchange and securities and the import and export of
currency and bullion;

It is hereby enacted as follows

Short title, extent and commencement

t. (1) This Act may be called the Foreign Exchange Regulation Act, 7947.
2 [(2) lt extends to the whole of Bangladesh, and applies to -
(a) all citizens of Bangladesh;

(b) all persons resident in Bangladesh; and

(c) all persons in the service of the People's Republic of Bangladesh wherever they may be.l

(3) lt shall come into force on such date as the Government may, by notification in the official Gazette,
appoint in this behalf.
( ) [Omitted by section 2 of the Foreign Exchange Regulation (Amendment) Act, 1952 (Act No. I of
1ss2).1

lnterpretation

2. ln this Act, unless there is anything repugnant in the subject or context,

(a) "Authorized dealer" means a person for the time being authorized under section 3 to deal in
foreign exchange;

3[(aa) "capital account transaction" means a transaction for the creation, modification, transfer or
liquidation of a capital asset, including but not limited to, securities issued in capital and
money markets, negotiable instruments, non-securitized claims, units of mutual fund or
collective investment securities, commercial credits and loans financial credits, sureties,

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 Corporate Laws and Practices

guarantees, deposit account operations, life insurance, personal capital movements, real
estate, foreign direct investment, portfolio and institutional investment;]

4[(b) "currency" includes -

(i) all coins, currency notes, bank notes, postal notes, money orders, cheques, drafts, traveler's
cheques, letters of credit, bills of exchange and promissory notes; and
(ii) Such other similar physical or non-physical instruments, or both as may be notified by the
Bangladesh Bank from time to time;l

sl(bb) "current account transaction" means receipts and payments which are not for the purpose of
transferring capital, and also includes-
(i) receipts and payments due in connection with foreign trade, other current business
including services, and normal short-term banking and credit facilities in ordinary course of
business;

(ii) receipts and payments due as interest on loans and as net income from investments;
(iii) moderate amounts of amortization of loans or for depreciation of direct investments, in the
ordinary course of business;
(iv) expenses in connection with foreign travel, education and medical care of self, parents,
spouse and children; and
(v) moderate remittances for family living expenses of parents, spouse and children resident
abroad;

(bbb) "export" means-

(i) sending of goods, physical or non-physical or both, from Bangladesh to a place outside
Bangladesh;

(ii) Providing services by persons resident in Bangladesh to any person outside Bangladesh; or
(iii) selling Bangladeshi goods or raw materials or non-physical contents to the enterprises in
Export Processing Zones, Special Economic Zones and High-tech parks of Bangladesh against
payment in foreign currency.]

(c) "foreign currency" means any currency other than Bangladesh currency;

(d) "foreign exchange" means foreign currency and includes any instrument drawn, accepted, made
or issued under 6[ clause (13) of Article 16 of the Bangladesh Bank Order,1"972l all deposits,
credits and balances payable in any foreign currency, and any drafts, traveler's cheques, letters
of credit and bills of exchange, expressed or drawn in Bangladesh currency but payable in any
foreign currency;

(e) "foreign security" means any security issued elsewhere than in Bangladesh and any security the
principal of or interest on which is payable in any foreign currency or elsewhere than in
Bangladesh;

(f) "gold" includes gold in the form of coin, whether legal tender or not, or in the form of bullion or
ingot, whether refined or no!

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 Corporate Laws und Practices

7 t (ff) "goods" means any goods as defined in the Customs Act, 1969 (Act No. lV of 1969);

(fff) "import" means bringing into Bangladesh any physical or non-physical goods or services;]
(g) "Bangladesh currency" means currency which is expressed or drawn in Bangladesh Taka;

(h) "owner", in relation to any security, includes any person who has power to sell or transfer
the security, or who has the custody thereof or who receives, whether on his own behalf or
on behalf of any other person, dividends or interest thereon, and who has any interest
therein, and in a case where any security is held on any trust or dividends or interest thereon
are paid into a trust fund, also includes any trustee or any person entitled to enforce the
performance of the trust or to revoke or vary, with or without the consent of any other
person, the trust or any terms thereof, or to control the investment of the trust moneys;

8 t(hh) "person" means any individual, and also includes-

(i) a partnership firm;

(ii) a company;

(iii) an association of persons or body of individuals, whether incorporated or not;

(iv) every artificial juridical entity not falling within any of the preceding sub-clauses; and
(v) any agency, office, or branch owned or controlled by such person;

(hhh) "person resident in Bangladesh" means

(i) an individual residing in Bangladesh for six months or more in the last twelve months;
(ii) an individual temporarily residing in Bangladesh holding a residential or working visa
valid for not less than six months;
(iii) a person whose place of business is in Bangladesh; or
(iv) a person whose principal place of business may be located outside Bangladesh but
branch or liaison office or representative office of such business is in Bangladesh;
(v) diplomatic, consular and other representative offices of the Government of the people's
Republic of Bangladesh abroad as well as Bangladeshi citizens employed at these offices;
(vi) persons holdings any office in service of the People's Republic of Bangladesh wherever
they may be for the time being either on duty or on leave:

provided that "person resident in Bangladesh" shall not include foreign diplomatic representations
or accredited officials of such representations located within Bangladesh and offices of organizations
established by international treaty located within Bangladesh;l

(i) "prescribed" means prescribed by rules made under this Act;

9 [(j) Bangladesh Bank means the Bangladesh Bank established under clause (1) of Article 3 of the
Bangladesh Bank Order, 19721;

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 Corporute Laws and Practices

10 t(k) "security" means either in physical or demat form,-

(i) shares, stocks, bonds, debenture stock and Government securities, as defined in the
Securities Act, 1920;
(ii) deposit receipts in respect of deposits of securities, units of mutual fund or collective
investment scheme, as defined in Securities and Exchange Commission (Mutual Fund) Rules,
2001; and
(iii) other instruments defined as security in the Securities and Exchange Ordinance, 1969
(Ordinance No. XVll of 1969); but does not include bill of exchange or promissory notes
other than Government promissory notes;

1-1t (kk) "service" means services of any description, including but not limited to, business services,
professional services, information technology services, information technology enabled
services, communication or telecommunication services, construction services, engineering
services, distribution services, educational services, environmental services, financial services
(such as-insurance, banking and capital market related services), health services, social
services, tourism services, travel services, recreational services, cultural services, sport
services, transport services, electrical or other energy services or such other service as may be
notified by the Government or the Bangladesh Bank from time to time;l
(l) "silver" means silver bullion or ingot, silver sheets and plates which have undergone no
process of manufacture subsequent to rolling and incurrent silver coin which is not legal
tender in Bangladesh or elsewhere;

(m) "transfer" includes, in relation to any security, transfer by way of loan or security.

Authorized dealers in foreign exchange

3. (1) The Bangladesh Bank may, on application made to it in this behalf, authorize any person to deal
in foreign exchange.

(2) An authorization under this section-

(i) may authorize dealings in all foreign currencies or may be restricted to authorizing dealings
in specified foreign currencies only;

(ii) may authorize transactions of all descriptions in foreign currencies or may be restricted to
authorizing specified transactions only;

(iii) may be granted to be effective for a specified period, or within pacified amounts, and may
in all cases be revoked for reasons appearing to it sufficient by the Bangladesh Bank12 [after
giving the Authorized dealer a reasonable opportunity of explaining its positionl.

(3) An Authorized dealer shall in all his dealings, in foreign exchange, comply with such general or
special directions or instructions as the Authorized dealers in foreign exchange

Bangladesh Bank may from time to time think fit to give, and, except with the previous
permission of the Bangladesh Bank, an Authorized dealer shall not engage in any transaction
involving any foreign exchange which is not in conformity with the terms of his authorization
under this section.

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 Corporate Laws and Practices

(a) An Authorized dealer shall, before undertaking any transaction in foreign exchange on behalf of
any person, require that person to make such declarations and to give such information as will
reasonably satisfy him that the transaction will not involve, and is not designed for the purpose
of, any contravention or evasion of the provisions of this Act or of any rules, directions or orders
made thereunder, and where the said person refuses to comply with any such requirement or
makes only unsatisfactory compliance therewith, the Authorized dealer shall refuse to
undertake the transaction and shall, if he has reason to believe that any such contravention or
evasion as aforesaid is contemplated by the person, report the matter to the Bangladesh Bank.

13t (5) Without prejudice to the provision of clause (iii) of sub-section (2) of section 3 or section 23,
Bangladesh Bank may, after giving reasonable opportunity of being heard, impose such amount
of fine and in such manner as may be prescribed by rules, on an Authorized dealer for vioiation
of terms of authorization or of general or special directions or instructions.]

Restrictions on dealing in foreign exchange

4. (1) Except with the previous general or special permission of the Bangladesh Bank, no person other
than an Authorized dealer shall in Bangladesh and no person resident in Bangladesh, other than
an authorized dealer shall outside Bangladesh, buy or borrow from, or sell or lend to, or
exchange with, any person not being an Authorized dealer, any foreign exchange.

(2) Except with the previous general or special permission of the Bangladesh Bank, no person
whether an Authorized dealer or otherwise, shall enter into any transaction which provides for
the conversion of Bangladesh currency into foreign currency or foreign currency into Bangladesh
currency at rates of exchange other than the rates for the time being Authorized by the
Bangladesh Bank

(3) Where any foreign exchange is acquired by any person other than an Authorized dealer for any
particular purpose, or where any person has been Restrictions on dealing in foreign exchange
permitted conditionally to acquire foreign exchange, the said person shall not use the foreign
exchange so acquired otherwise than for that purpose or, as the case may be, fail to comply
with any condition to which the permission granted to him is subject, and where any foreign
exchange so acquired cannot be so used or, as the case may be, the conditions cannot be
complied with, the said person shall without delay sell the foreign exchange to an authorized
dealer.

(4) Nothing in this section shall be deemed to prevent a person from buying from any post office, in
accordance with any law or rules made thereunder for the time being in force, any foreign
exchange in the form of postal orders or money orders.

14t (5) Any person resident in Bangladesh may sell or purchase foreign exchange to or from an
Authorized dealer if such sale or purchase is a current account transaction; pr.ovided that the
Bangladesh Bank may, in public interest and in consultation with the Government, impose such
reasonable restriction on current account transactions as may be needed to respond to current
or capital account imbalances;

(6) Subject to such restrictions as may be prescribed, the Bangladesh Bank, in consultation
with the
Government, may specify the classes of permissible capital account transactions.]
 Corporate Laws and Practices

Restrictions on payments

5. (1) Save as may be provided in and in accordance with any general or special exemption from the
provisions of this sub-section which may be granted conditionally or unconditionally by the
Bangladesh Bank, no person in or resident in Bangladesh shall-
(a) make any payment to or for the credit of any person resident outside Bangladesh;

(b) draw, issue or negotiate any bill of exchange or promissory note or acknowledge any debt, so
that a right (whether actual or contingent) to receive a payment is created or transferred in
favor of any person resident outside Bangladesh;
(c) make any payment to or for the credit of any person by order or on behalf of any person
resident outside Bangladesh;
(d) place any sum to the credit of any person resident outside Bangladesh;

(e) make any payment to or for the credit of any person as consideration for or in association with-
Restrictions on payments
(i) the receipt by any person of a payment or the acquisition by any person of property outside
Bangladesh;

(ii) the creation or transfer in favor of any person of a right whether actual or contingent to
receive a payment or acquire property outside Bangladesh;

(f) draw, issue or negotiate any bill of exchange or promissory note, transfer any security or
acknowledge any debt, so that a right (whether actual or contingent) to receive a payment is
created or transferred in favor of any person as consideration for or in association with any
matter referred to in clause

(e). (2) Nothing in sub-section (1) shall render unlawful-

(a) the making of any payment already Authorized, either with foreign exchange obtained from an
Authorized dealer under section 4 or with foreign exchange retained by a person in pursuance
of an authorization granted by the Bangladesh Bank;
(b) the making of any payment with foreign exchange received by way of salary or payment for
services not arising from business in, or anything done while in Bangladesh.

(3) Nothing in this section shall restrict the doing by any person of anything within the scope of any
authorization or exemption granted under this Act.

(4) For the purposes of this section "security" also includes coupons or warrants representing
dividends or interest and life or endowment insurance policies.

Blocked accounts

6. (1) Where an exemption from the provisions of section 5 is granted by the Bangladesh Bank in
respect of payment of any sum to any person resident outside Bangladesh and the exemption is
made subject to the condition that the payment is made to a blocked account-

(a) the payment shall be made to a blocked account in the name of that person in such manner
as the Bangladesh Bank may by general or special order direct, and

428lFxg*
 Corporate Laws und Practices

(b) the crediting of that sum to that account shall, to the extent of the sum credited, be a good
discharge to the person making the payment. Blocked accounts

(2) No sum standing at the credit of a blocked account shall be drawn on except in accordance with
any general or special permission which may be granted conditionally or otherwise by the
Bangladesh Bank.

(3) ln this section "blocked account" means an account opened as a blocked account at any office or
branch in Bangladesh of a bank authorized in this behalf by the Bangladesh Bank, or an account
blocked, whether before or after the commencement of this Act, by order of the Bangladesh
Bank.

Special accounts

7. (1) Where in the opinion of the Government it is necessary or expedient to regulate payments due to
persons resident in any territory, the Government may, by notification in the official Gazette,
direct that such payments or any class of such payments shall be made only into an account
(hereinafter referred to as a special account) to be maintained for the purpose by the
Bangladesh Bank or an Authorized dealer specially Authorized by the Bangladesh Bank in this
behalf.

(2) The credit of a sum to a special account shall, to the extent of the sum credited, be a good
discharge to the person making the payment:

Provided that where the liability of the person making the payment is to make the payment in
foreign currency, the extent of the discharge shall be ascertained by converting the amount paid
into that currency at such rate of exchange as is for the time being fixed or Authorized by the
Bangladesh Bank.

(3) The sum standing to the credit of any special account shall from time to time be applied-

(a) where any agreement is entered into between the Government and the Government of the
territory to which the aforesaid notification relates for the regulation of payments between
persons resident in Bangladesh and in that territory, in such manner as the Bangladesh Bank
having regard to the provisions of such agreement, may direct, or

(b) where no such agreement is entered into, for the purpose of paying wholly or partly, and in
such order of preference and at such times as the Government may direct; debts due from
the persons resident in the said territory to persons resident in Bangladesh or in such other
territories as the Government may, by order, specify in this behalf.

Restrictions on import and export of certain currency and bullion

8. (1) The Government may, by notification in the official Gazette, order that, subject to such
exemptions, if any, as may be contained in the notification, no person shall, except with the
general or special permission of the Bangladesh Bank and on payment of the fee, if any,
prescribed bring or send into Bangladesh any gold or silver or any currency notes or bank notes
or coin whether Bangladesh or foreign.

4)Ql!''
'--l'::"
r,,
 Corporute Lsws und Practices

Explanation - The bringing or sending into any part or place in the territories of Bangladesh of
any such article as aforesaid, intended to be taken out of the territories of Bangladesh without
being removed from the ship or conveyance in which it is being carried, shall nonetheless be
deemed to be bringing or as the case may be sending, into the territories of Bangladesh of that
article for the purposes of this section.

(2) No person shall, except with the general or special permission of the Bangladesh Bank or the
written permission of a person Authorized in this behalf by the Bangladesh Bank, take or send
out of Bangladesh any gold, jewellery or precious stones, or Bangladesh currency notes, bank
notes or coin or foreign exchange.

(3) The restrictions imposed by sub-sections (1) and (2) shall be deemed to have been imposed
under 15 [section 16 of the Customs Act, 1969,] without prejudice to the provisions of section
23 of this Act, and all the provisions of that Act shall have effect accordingly.

Acquisition by Government of foreign exchange

9. The Government may, by notification in the official Gazette, order every person in, or resident in
Bangladesh-

(a) who owns such foreign exchange as may be specified in the notification, to offer it, or cause it to
be offered for sale to the Bangladesh Bank on behalf of the Government or to such person, as
the Bangladesh Bank may authorize for the purpose, at such price as the Government may fix,
being a price which is in the opinion of the Government not less than the market rate of the
foreign exchange when it is offered for sale;

(b) who is entitled to assign any right to receive such foreign exchange as may be specified in the
notification, to transfer that right to the Bangladesh Bank on behalf of the Government on
payment of such consideration therefore as the Government may fix: Restrictions on import and
export of certain currency and bullion Acquisition by Government of foreign exchange

Provided that the Government may by the said notification or another order exempt any person
or class of persons from the operation of such order:

Provided further that nothing in this section shall apply to any foreign exchange acquired by a
person from an Authorized dealer and retained by him with the permission of the Bangladesh
Bank for any purpose.

Duty of persons entitled to receive foreign exchange etc.

10. (1) No person who has a right to receive any foreign exchange or to receive from a person resident
outside Bangladesh a payment in Taka shall, except with the general or special permission of the
Bangladesh Bank, do or refrain from doing any act with intent to secure-

(a) that the receipt by him of the whole or part of that foreign exchange or payment is delayed,
or
(b) that the foreign exchange or payment ceases in whole or in part to be receivable by him.

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 Corporate Laws and Practices

(2) Where a person has failed to comply with the requirements of sub-section (1) in relation to any
foreign exchange or payment in Taka, the Bangladesh Bank may give to him such directions as
appear to be expedient for the purpose of securing the receipt of the foreign exchange or
payment as the case may be.

Power to regulate the uses, etc. of imported gold and silver

11. The Government may, by notification in the official Gazette, impose such conditions as it thinks
necessary or expedient on the use or disposal of or dealings in gold and silver prior to, or at the time
of, import into Bangladesh.

16 [Receipts of proceeds for exported goods and services]

L2. t7[ (1)The Government may, by notification in the official Gazette, prohibitthe export of anygoods
or classes of goods or services or classes of services specified in such notification, from Bangladesh
directly or indirectly to any place so specified unless a declaration supported by such evidence as
may be prescribed or so specified is furnished by the exporter to the prescribed authority that the
amount representing the full export value of the goods or services has been or shall within the
prescribed period be, received in the prescribed manner.]

(2) Where any export of goods has been made to which a notification under sub-section (1) applies,
no person entitled to sell, or procure the sale of, the said goods shall, except with the
permission of the Bangladesh Bank, do or refrain from doing any act with intent to secure that-

Duty of Persons entitled to receive foreign exchange etc. Power to regulate the uses, etc. of
imported gold and silver 16 [Receipts of proceeds for exported goods and services]

(a) the sale of the goods is delayed to an extent which is unreasonable having regard to the
ordinary course of trade, or (b) payment for the goods is made otherwise than in the
prescribed manner or does not represent the full amount payable by the foreign buyer in
respect of the goods, subject to such deductions, if any, as may be allowed by the
Bangladesh Bank, or is delayed to such extent as aforesaid:

Provided that no proceedings in respect of any contravention of this sub-section shall be

instituted unless the prescribed period has expired and payment for the goods representing
the full amount as aforesaid has not been made in the prescribed manner.

(3) Where in relation to any such goods the said period has expired and the goods have not been
sold and payment therefore has not been made as aforesaid, the Bangladesh Bank may give to
any person entitled to sell the goods or to procure the sale thereof, such directions as appear to
it to be expedient for the purpose of securing the sale of the goods and payment therefore as
aforesaid, and without prejudice to the generality of the foregoing provision, may direct that the
goods shall be assigned to the Government or to a person specified in the directions.

(4) Where any goods are assigned in accordance with sub-section (3), the Government shall pay to
the person assigning them such sum in consideration of the net sum recovered by or on behalf
of the Government in respect of the goods as may be determined by the Government.

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 Corporate Laws und Practices

(5) Where in relation to any such goods the value as stated in the invoice is less than the amount
which in the opinion of the Bangladesh Bank represents the full export value of those goods, the
Bangladesh Bank may issue an order requiring the person holding the shipping documents to
retain possession thereof until such time as the exporter of the goods has made arrangements
for the Bangladesh Bank or a person Authorized by the Bangladesh Bank to receive on behalf of
the exporters payment in the prescribed manner of an amount which represents in the opinion
ofthe Bangladesh Bank the full export value of the goods.

(6) For the purpose of ensuring compliance with the provisions of this section and any orders or
directions made thereunder, the Bangladesh Bank may require any person making any export of
goods to which a notification under sub-section (1) applies to exhibit contracts with his foreign
buyer or other evidence to show that the full amount payable by the said buyer in respect of the
goods has been, or will within the prescribed period be, paid in the prescribed manner.

Regulation of export and transfer of securities

13. (1) Nopersonshall,exceptwiththegeneralorspecial permissionoftheBangladeshBank:-

(a) take or send any security to any place outside Bangladesh;

(b) transfer any security or create or transfer any interest in a security to or in favor of a person
resident outside Bangladesh;
(c) transfer any security from a register in Bangladesh to a register outside Bangladesh or do
any act which is calculated to secure, or forms part of a series of acts which together are
calculated to secure, the substitution for any security which is either in, or registered in
Bangladesh, of any security which is either outside or registered outside Bangladesh;
(d) issue, whether in Bangladesh or elsewhere, any security which is registered or to be
registered in Bangladesh, to a person resident outside Bangladesh.

(2) Where the holder of a security is a nominee, neither he nor any person through whose agency
the exercise of all or any of the holder's rights in respect of the security is controlled shall,
except with the general or special permission of the Bangladesh Bank, do any act whereby he
recognizes or gives effect to the substitution of another person as the person from whom he
directly receives instructions, unless both the persons previously instructing him and the person
substituted for that person were, immediately before the substitution, resident in Bangladesh.
(3) The Bangladesh Bank may, for the purpose of securing that the provisions of this section are not
evaded, require that the person transferring any security and the person to whom such security
is transferred shall subscribe to a declaration that the transferee is not resident outside
Bangladesh.

(4) Notwithstanding anything contained in any other law, no person shall, except with the
permission of the Bangladesh Bank -
(a) enter any transfer of securities in any register or book in which securities are registered or
inscribed if he has any ground for Regulation of export and transfer of securities suspecting
that the transfer involves any contravention of the provisions of this section, or

(b) enter in any such register or book, in respect of any security, whether in connection with the
issue or transfer of the security or otherwise, an address outside Bangladesh except by way
of substitution for any such address in the same country or for the purpose of any

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 Corporote Laws and Practices

transaction for which permission has been granted under this section with knowledge that it
involves entry of the said address,

(5) For the purposes of this section,-

(a) "holder" in relation to a bearer security means the person having physical custody of the
security; provided that, where a bearer security is deposited with any person in a locked or
sealed receptacles from which the person with whom it is deposited is not entitled to
remove it without the authority of some other person, that other person shall be deemed to
be the holder of the security;

(b) "nominee" means a holder of any security (including bearer security) or any coupon
representing dividends or interest who, as respects the exercise of any rights in respect of
the security or coupon, is not entitled to exercise those rights except in accordance with
instructions given by some other person, and a person holding a security or coupon as a
nominee shall be deemed to act as nominee for the person who is entitled to give
instructions either directly or through the agency of one or more persons, as to the exercise
by the holder of the security or coupon of any rights in respect thereof and is not, in so
doing, himself under a duty to comply with instructions given by some other person;

(c) "security" also includes coupons or warrants representing dividends or interest, and life or
endowment insurance policies;
(d) "a person resident outside Bangladesh" includes a foreign national for the time being
resident in Bangladesh.

Custody of securities

14. (1) The Government may, by notification in the official Gazette, order every person by whom or on
whose behalf a security or document of title to a security specified in the order is held in
Bangladesh to cause the said security or document of title to be kept in the custody of an
authorized depository named in the order: Provided that the Bangladesh Bank may by order in
writing permit any such security to be withdrawn from the custody of the Authorized depository
subject to such conditions as may be specified in the order.

(2) No Authorized depository may part with any security covered by an order under sub-section (1)
without the general or special permission of the Bangladesh Bank except to, or to the order of,
another Authorized depository.

(3) Except with the general or special permission of the Bangladesh Bank, no Authorized depository
shall-

(a) accept or part with any security covered by an order under sub-section (1) whereby the
security is transferred into the name of a person resident outside Bangladesh, or

(b) do any act whereby he recognizes or gives effect to the substitution of another person as the
person from whom he directly receives instructions relating to such security unless the
person previously so instructing him and the person substituted for that person were
immediately before the substitution resident in Bangladesh.

433 1{lagr:
 Corporate Luws und Pructices

(4) Except with the general or special permission of the Bangladesh Bank, no person shall buy, sell or
transfer any security, or document of title to a security, covered by an order under sub-section
(1) unless such security or document of title has been deposited in accordance with the order.

(5) Except with the general or special permission of the Bangladesh Bank, no capital money, interest
or dividend in respect of any security covered by an order under sub-section (1) shall be paid in
Bangladesh except to or to the order of the Authorized depository having the custody of the
security.

(6) For the purposes of this section,-

(a) "Authorized depository" means a person notified by the Government to be entitled to accept
the custody of securities and documents of title to securities, and

(b) "security" shall include coupons. Custody of securities

Restrictions on issue of bearer securities

j.5. The Government may, by notification in the official Gazette, order that except with the general or
special permission of the Bangladesh Bank no person shall in Bangladesh issue any bearer security or
coupon or so alter any document that it becomes a bearer security or coupon.

Acquisition by Government of Foreign securities

16. (1) Subject to any exemptions that may be contained in the notification, the Government may, if it is
of opinion that it is expedient so to do for the purpose of strengthening its foreign exchange
position by notification in the official Gazette :-

(a) order the transfer to itself of any foreign securities specified in the notification at a price so
specified, being a price which is, in the opinion of the Government no less than the market
value of the securities on the date of the notification, or

(b) direct the owner of any foreign securities specified in the notification, to sell or procure the
sale of the securities and thereafter to offer or cause to be offered the net foreign exchange
proceeds of the sale to the Bangladesh Bank on behalf of the Government or to such person
as the Bangladesh Bank may authorize for the purpose, at such price as the Government
may fix, being a price which is in the opinion of the Government not less than the market
rate of the foreign exchange when it is offered for sale.

(2) On the issue of a notification under clause (a) of sub-section (1),- (a)the securities to which the
notification relates shall forthwith vest in the Government free from any mortgage, pledge or
charge, and the Government may deal with them in such manner as it thinks fit.

(b) the owner of any of the securities to which the notification relates and any person who is
responsible for keeping any register or book in which any of those securities are registered
or inscribed, or who is otherwise concerned with the registration or inscription of any of
those securities, shall do all such things as are necessary or as the Government or the
Bangladesh Bank may order to be done, for the purpose of securing that-

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 Corporate Lsws and Practices

(i) the securities and any documents of title relating thereto are delivered to the
Government and, in the case of registered or inscribed securities, that the securities are
registered or Acquisition by Government of foreign securities Restrictions on issue of
bearer securities inscribed in the name of the Government or of such nominee of the
Government as it may specify, and

(ii) any dividend or interest on those securities becoming payable on or after the date of the
issue of the notification are paid to the Government or its nominee as aforesaid and
where in the case of any security payable to bearer which is delivered in pursuance of
the said notification, any coupon representing any such dividend or interest are not
delivered with the security, such reduction in the price payable therefor shall be made
as the Government thinks fit:

Provided that where the price specified in the notification in relation to any security is ex-
dividend or ex-interest, this sub-clause shall not apply to that dividend or interest or to any
coupon representing it.

(3) A certificate signed by any person Authorized in this behalf by the Government that any specified
securities are securities transferred to the Government under this section shall be treated by all
persons concerned as conclusive evidence that the securities have been so transferred.

Restriction on settlement

17. (tl No person resident in Bangladesh shall, except with the general or special permission of the
Bangladesh Bank, settle any property, otherwise than by will upon any trust under which a
person who at the time of the settlement is resident outside Bangladesh elsewhere than in
territories notified in this behalf by the Bangladesh Bank, will have an interest in the property or
exercise, other than by will, any power for payment in favor of a person who at the time of the
exercise of the power is resident outside Bangladesh elsewhere than in such notified territories.

(2) A settlement or power as aforesaid shall not be invalid except in so far as it confers any right or
benefit on any person who at the time of the settlement or the exercise of the power is resident
outside Bangladesh, elsewhere than in territories notified by the Bangladesh Bank.

Certain provisions as to companies

18. (1) Except with the general or special permission of the Bangladesh Bank, no person resident in
Bangladesh shall do any act whereby a company, which is controlled by person resident in
Bangladesh ceases to be so controlled.

(2) Except with the general or special permission of the Bangladesh Bank, no person resident in
Bangladesh shall lend any money or security to any company, not being a banking company,
which is by any means Restriction on settlement Certain provisions as to companies controlled,
whether directly or indirectly, by persons resident outside

Bangladesh elsewhere than in the territories notified in this behalf by the Bangladesh Bank.

ln this sub-section, "company" includes a firm, branch or office of a company or firm.

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 Corporate Laws and Practices

Restriction on foreign companies

18 B. 20[(1) Person resident outside Bangladesh (whether or not a citizen of Bangladesh) or a person
who is not a citizen of, but resident in, Bangladesh or a company (other than a banking company)
not incorporated under any law for the time being in force in Bangladesh shall report to
Bangladesh Bank within 3O(thirty) days of obtaining permission from Bangladesh lnvestment
Development Authority or similar competent authority in Bangladesh to establish in Bangladesh
a branch office or liaison office or representative office or any other place of business for
carrying on any activity of a trading, commercial or industrial nature.]

Power to call for information

19.221(1) The Government or the Bangladesh Bank may, at any time by notification in the official
Gazette, direct any citizen of Bangladesh, any person resident in Bangladesh and any person in
the Service of the People's Republic of Bangladesh wherever they may be, subject to such
exceptions, if any, as may be specified in the notification, to make a return of their holdings of
foreign exchange, foreign securities; and of any immovable property or industrial or commercial
undertaking or company outside Bangladesh, held, owned, established or controlled by him or
in which he has any right, title or interest, within such period and giving such particulars, as may
be so specified.l

(2)The Government may by order in writing require any person to furnish it or any person specified
in the order with any information, book or other document in his possession, being information,
book or document which the Government considers it necessary or expedient to obtain and
examine for the purposes of this Act and may, at any time, by notification in the official Gazette,
direct that the power to make such order shall for such period as may be specified in the
direction, be exercised by the Bangladesh Bank.

23[ (3) On a representation in writing made by a person Authorized in this behalf by the
Government or the Bangladesh Bank and supported by a statement on oath of such person that
he has reason to believe that a Restriction on Foreign companies

Power to call for information

contravention of any of the provisions of this Act has been or is being or is about to be committed in
any place or that evidence of the contravention is to be found in such place, a district magistrate, a
Upazila magistrate or a magistrate of the first class, may by warrant, authorize any police officer not
below the rank of sub-inspector-

(a) to enter and search any place in the manner specified in the warrant, and
(b) seize any books or other documents found in or on such place.

Explanation - ln this sub-section, "place" includes a house, building, tent, vehicle, vessel or aircraft.
(3A) A police officer Authorized under sub-section (3) may search any person who is found in or
whom he has reasonable ground to believe to have recently left or to be about to enter such place
and to seize any article found in the possession of or upon such person and believed by the police
officer so Authorized to be evidence of the commission of any offence under this Act.

436 1{r"rg*
 Corporate Laws and Practices

V of 1898

(38) A police officer Authorized under sub-section (3) shall conduct any search under that sub-
section or under sub-section (3A) in accordance with the provisions relating to search in the Code of
Criminal Procedure, 1898 (V of 1898).I

Xl of L922

( ) The provisions of sub-sections (1), (2) and (3) of section 54 of the lncome-tax Act, i-922 (Act no.
Xl of 19221 shall apply in relation to information obtained under sub-section (2) of this section as
they apply to the particulars referred to in that section, and for the purposes of such application-

(a)the said sub-section (3)shall be construed as if in clause (a)thereof there was included reference
to a prosecution for an offence under section 23 of this Act, and

(b) persons to whom any information is required to be furnished under an order made under sub-
section (2) of this section shall be deemed to be public servants within the meaning of that
sectio n.

Power of inspection

241 19A. (1) The Government or the Bangladesh Bank may, at any time, cause an inspection to be
made, by one or more of its officers, of the books of accounts and other documents of any person,
firm or business Power of inspection V of 1898 Xl of 1922

organization or concern required to submit to the Bangladesh Bank any return, statement or
information under this Act and, where necessary, direct all such books of accounts and other
documents to be seized.

(2) Every such person , firm, business organization and concern shall produce books of accounts and
other documents and furnish such statements and information to such officer or officers in
connection with the inspection under sub-section (1).

(3) Failure to produce any books of accounts or other documents or to furnish any statement or
information required under sub-section (2) shall be deemed to be contravention of the
provisions of this Act.l

Supplementary provisions

(1) Nothing in this Act relating to the payment of any price or sum by the Government shall be
construed as requiring the Government to pay that price or sum otherwise than in Bangladesh
currency or otherwise than in Bangladesh.

(2) The Bangladesh Bank may give directions in regard to the making of payments and the doing of
other acts by bankers, Authorized dealers, travel agents, carriers, whether common or private
stock brokers and other persons who are Authorized by the Bangladesh Bank to do anything in
pursuance of this Act in the course of their business, as appear to it to be necessary or expedient
for the purpose of securing compliance with the provisions of this Act and any rules, orders or
directions made thereunder.

437 | X} e '9 ,:,

 Corporate Laws and Practices

261 (3). Bangladesh Bank, may, by notification in the official Gazette, require any or all individual or
class of individual (other than diplomats or any group of individual, as specified in the notification)
who is not a citizen of Bangladesh, but staying or working in Bangladesh or providing any service in
Bangladesh for any period to any person to provide information, which Bangladesh Bank considers it
necessary or expedient for the purpose of this Act, to Bangladesh Bank or any other authority, as
stated in such notification.l

Contracts in evasion of this Act

19. (1) No person shall enter into any contract or agreement which would directly or indirectly evade or
avoid in any way the operation of any provision of this Act or of any rule, direction or order made
thereu nder.
(2) Any provision of, or having effect under this Act, that a thing shall Contracts in evasion of this Act
Supplementary provisions not be done without the permission of the Government or the
Bangladesh Bank, shall not render invalid any agreement by any person to do that thing, if it is a
term of the agreement that that thing shall not be done unless permission is granted by the
Government or the Bangladesh Bank, as the case may be; and it shall be an implied term of every
contract governed by the law of any part of Bangladesh that anything agreed to be done by any
term of that contract which is prohibited to be done by or under any of the provisions of this Act
except with the permission of the Government or the Bangladesh Bank, shall not be done unless
such permission is granted.

(3) Neither the provisions of this Act nor any term (whether expressed or implied) contained in any
contract that anything for which the permission of the Government or the Bangladesh Bank is
required by the said provisions shall not be done without that permission, shall prevent legal
proceedings being brought in Bangladesh to recover any sum which, apart from the said
provisions and any such term, would be due, whether as a debt, damages or otherwise, but -

(a) the said provisions shall apply to sums required to be paid by any judgment or order of any
Court as they apply in relation to other sums; and

(b) no steps shall be taken for the purpose of enforcing any judgment or order for the payment
of any sum to which the said provisions apply except as respects so much thereof as the
Government or the Bangladesh Bank, as the case may be, may permit to be paid; and

(c) for the purpose of considering whether or not to grant such permission, the Government or
the Bangladesh Bank, as the case may be, may require the person entitled to the benefit of
the judgment or order and the debtor under the judgment or order to produce such
documents and to give such information as may be specified in the requirement.

XXVI of 1881

(4) Notwithstanding anything in the Negotiable lnstruments Act, 1881 (Act No. XXVI of 1881),
neither the provisions of this Act or of any rule, direction or order made thereunder, nor any
condition, whether express or to be implied having regard to those provisions, that any payment
shall not be made without permission under this Act, shall be deemed to prevent any
instrument being a bill of exchange or promissory note. XXVI of 188L

438 11]*g*
 Corporate Laws and Practices

False statement

20, No person shall, when complying with any order or direction, under section L9 or when making any
application or declaration to any authority or person for any purpose under this Act, give any
information or make any statement which he knows or has reasonable cause to believe to be false,
or not true, in any material particular.

Grant of immunity in certain cases

27122A.(1,) The Government may, if it is of the opinion (the reason for such opinion being recorded
in writing) that with a view to obtaining the evidence of any person supposed to have been
directly or indirectly concerned in, or privy to, the contravention of any of the provisions of this
Act or of any rule, direction or order made or given thereunder it is necessary or expedient so to
do, grant such person immunity from prosecution under this Act or any other law for the time
being in force, and may also grant such person immunity from imposition of any penalty under
this Act, subject to the condition of his making full and true disclosure of the whole
circumstances relating to such contravention.

(2) An immunity granted to, and accepted by the person concerned under sub-section (1) shall, to
the extent to which the immunity extends, render him immune from prosecution for any
offence or, as the case may be, from imposition of any penalty under this Act to which the
immunity relates.

(3) lf the Government is satisfied that any person to whom immunity under sub-section (1) was
granted has not complied with any of the conditions subject to which the immunity was granted
or is willfully concealing anything or giving false evidence, it may record a finding to that effect
and thereupon the immunity so granted shall be deemed to have been withdrawn and such
person may be tried for the offence to which the immunity relates and shall be also liable to
such penalty as he would have been liable to but for the grant of immunity under this section.l

Penalty and procedure

28123. (1) Whoever contravenes, attempts to contravene or abets the contravention of any of the
provisions of this Act or of any rules, direction or order made thereunder shall notwithstanding
anything contained in the Code of Criminal Procedure, 1898 (Act No. V of 1898), be tried by a
Tribunal constituted by section 23A, and shall be punishable with imprisonment for a term
which may extend to 29[ Seven years] or with fine or with both, and any such Tribunal trying any
such contravention may, if it thinks fit, and in addition to any sentence which it may impose for
such contravention, direct that any currency, security, gold or silver, or goods or other property
in respect of which the contravention has taken place shall be confiscated.

False statement Grant of immunity in certain cases Penalty and procedure

(2) Notwithstanding anything contained in the Code of Criminal Procedure, 1898 (Act No. V of 1898),
any offence punishable under this section shall be cognizable for such period as the Government
may from time to time, by notification in the official Gazette, declare.

439 1ilr;1,":
 Corporate Laws and Pructices

(3) A Tribunal shall not take cognizance of any offence punishable under this section and not
declared by the Government under the preceding sub-section to be cognizable for the time
being or of an offence punishable under section 54 of the lncome-tax Act, 1922 (Act No. Xl of
tg22l, as applied by section 19, except upon complaint in writing made by a person Authorized
by the Government or the Bangladesh Bank in this behalf.

Provided that where any such offence is the contravention of any of the provisions of this Act or
any rule, direction or order made thereunder which prohibits the doing of an act without
permission and is not declared by the Government under the preceding sub-section to be
cognizable for the time being, no such complaint shall be made unless the person accused of the
offence has been given an opportunity of showing that he had such permission.

(4) Where the person guilty of an offence under this Act is a company or other body corporate,
every Director, Manager, Secretary and other officer thereof who is knowingly a party to the
offence shall also be guilty of the same offence and liable to the same punishment.

Tribunal, its powers, etc.

23A. (1) Every Sessions Judge shall, for the areas within the territorial limits of his jurisdiction, be a

Tribunal for trial of an offence punishable under section 23.

(2) A tribunal may transfer any case for trial to an Additional Sessions Judge within its jurisdiction
who shall, for trying a case so transferred, be deemed to be a Tribunal constituted for the
purpose.

(3) A Tribunal shall have all the powers of a Magistrate of the First Class in relation to criminal trials,
and shall follow as nearly as may be, the procedure provided in the Code of Criminal Procedure,
1898 (Act No. V of L898), for trials before such Magistrate, and shall also have powers as
provided in the said Code in respect of the following matters, namely:-

(a) directing the arrest of the accused;

(b) issuing search warrants;

Tribunal, its powers, etc.

(c) ordering the police to investigate any offence and report;

(d) authorizing detention of a person during police investigation;
(e) ordering the release of the accused on bail.

(4) All proceedings before a Tribunal shall be deemed to be judicial proceeding within the meaning
of sections 193 and 228 of the Penal Code (Act No. XLV of 1"860), and for the purposes of section
196 thereof, and the provisions relating to the execution of orders and sentences in the Code of
Criminal Procedure, 1898 (Act No. V of l-898), shall, so far as may be, apply to orders and
sentences passed by a Tribunal.

(5)As regards sentences of fine, the powers of a Tribunal shall be as extensive as those of a Court of
Session.

4401f;:g*
 Corporate Laws and Pructices

(6) 30t The Bangladesh Bankl or any other person aggrieved by a judgment of a Tribunal may,
within
three months from the date of the judgment, appeal to the 31[ High Court Division].

(7) Save as provided in the preceding sub-section, all judgments and orders passed by a Tribunal
shall be final.

Burden of proof in certain cases

24. (1') Where any person is tried for contravening any provision of this Act or of any rule, direction
or order made thereunder which prohibits him from doing an act without permission, the
burden of proving that he had the requisite permission shall be on him.

(2) lf in a case in which the proof of complicity of a person resident in Bangladesh with a person
outside Bangladesh is essential to prove an offence under this Act, then after proof of the
circumstances otherwise sufficient to establish the commission of the offence, it shall be
presumed that there was such complicity, and the burden of proving that there was no such
complicity shall be on the person accused of the offence.

Power to Government to give direction

25. For the purposes of this Act the Government may from time to time give to the Bangladesh Bank
such general or special directions as it thinks fit, and the Bangladesh Bank shall, in the exercise
of its functions under this Act, comply with any such directions.

Bar of legal proceedings

26' No suit, prosecution or other legal proceedings shall lie against any person for anything in good
faith done or intended to be done under this Act or any rule, direction or order made
thereunder.

Power to make rules

27.Ihe Government may, by notification in the official Gazette, make rules for carrying into effect
the provisions of this Act.

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 Corporute Laws and Practices

GUIDELINES FOR FOREIGN EXCHANGE TRANSACTIONS

Volume-2

INTRODUCTION

Authorized Dealers being responsible for dealings in foreign exchange are required to keep proper
records. lt is also a requirement that they submit to the Bangladesh Bank prescribed periodic returns
and statements of all foreign exchange transactions concluded by them.

It should be noted that besides the returns/schedules/ statements prescribed in this volume, certain
other statements regarding different types of transactions are also required to be submitted in terms of
the relevant instructions in volume-1 of this publication.

SUBMISSION OF RETURNS OF FOREIGN EXCHANGE TRANSACTIONS

Maintenance of records

Authorized Dealers must maintain proper records of all dealings in foreign exchange including
transactions on non-resident Taka accounts in their books.

Submission of Returns to the Bangladesh Bank

Authorized Dealers must submit returns and statements to the Bangladesh Bank as prescribed in this
chapter. Where there is no transaction to report during a particular period, a NIL return/statement
should be submitted. The returns/statements must be submitted to the Bangladesh Bank within the
prescribed dates. These returns/statements are of great importance to the Bangladesh Bank. Therefore,
care should be taken by the Authorized Dealers to ensure that all transactions are correctly reported
and the relative forms are properly filled in. The Bangladesh Bank will take a serious view of the failure
of any branch of an Authorized Dealer to furnish returns regularly or promptly as well as of irregularities,
if any, detected in the operations of any branch and where it deems fit, it may direct the Authorized
Dealer concerned to refrain from transacting foreign exchange business by the branch concerned.

The system of reporting transactions is designed to compile figures on the basis of actual entries in the
currency accounts so that there are no suspense items.

Authorized Dealers should report transactions as per following procedure

Export

(i) Negotiation of export bills :

Transactions in respect of export bills negotiated by Authorized Dealers should be reported as

purchases only at the time entries are made in the currency account duly supported by EXP Form
(Appendix 5119,Vol.L) and Schedule A.

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 Corporate Laws und Practices

(ii) Export bills drawn on collection basis

Sometimes Authorized Dealers also purchase export bills drawn on collection/CAD basis.
Transactions relating to such export bills should be reported as outright purchases against "Exports"
in the summary statement after the transactions are put through the currency account on receipt of
advice of realization of the export proceeds.

(b) other Receipts:

The procedure indicated in sub-para (a) (i) above should also be followed with regard to DDs and
MTs etc.; ln other words, purchases in respect of DDs and MTs etc. shall be reported only when the
transactions are put through the currency accounts.

This is to clarify that in case of reporting of receiving wage earners' remittance from abroad, source
country of the remitter shall be treated as country of remittance regardless of the country from
which the cover fund has been received.

(c) lmports:

Sales on account of import bills under LCs/contracts shall be reported when the transactions are put
through the currency account on receipt of import documents and not on the basis of retirement of
bills by the importers.

(i) All sales on account of imports are required to be supported by the original copy of the IMP
Form (Appe ndix 5 / tt, Vol. 1).

(ii) With regard to import bills received on collection/CAD basis, the transactions will be reported
on Schedule E-2 supported by original IMP Form.

(iii) ln case of CFR/CIF basis import, AD should report FOB value in the relevant schedules (E-1, E-2
etc.) and country shall be the country of origin of goods. Related freight, insurance and other
charges should be reported as invisible payments in relevant schedules (E-3... etc.) while country
shall be the country of origin of beneficiary with appropriate purpose code.

(d)Other Payments :

Transactions relating to DDs and MTs issued by the Authorized Dealers should also be reported only
at the time entries are made in the currency accounts.

Transactions in non-resident Taka accounts of foreign banks and correspondents including barter
accounts shall also be reported by Authorized Dealers in the manner indicated in this paragraph.

Coding of Transactions

Authorized Dealers will give code numbers for all receipts as well as payment transactions on the
relevant forms as also in the columns provided in the relevant schedules, including stubs given on
the right hand top of the schedules relating to "Period", "Authorized Dealers" and "Currency".

443 | lj ,t g, *.
 Corporate Laws and Practices

(a) Code lists for reporting of external sector transactions by the ADs have been provided for the
following items:

PERIOD Code-0

AUTHORIZED DEALER Code-1

CURRENCY Code-2

CO U NTRY/TE RRITO RY/R EG ION Code-3

MONEY CHANGER Code-4

EXPORTS (visible receipts) HS Code Guide

INVISIBLE RECEIPTS Code-5

IMPORTS (visible payments) HS Code Guide

INVISIBLE PAYMENTS Code-7

CATEG O RY/DEPARTM E NT/SECTOR Code-8

UNIT Code-9

Authorized Dealers are advised to use the HS Code Numbers as per First Schedule of the Customs Act,
1969, while reporting of commodity exports and imports in the relevant Schedules. Authorized Dealers
are also advised to take utmost care while reporting of the Unit Code in the relevant Schedules. They are
to choose the specific unit of the commodity as corresponds to the right of each of the commodity
items. lf export or import contract is in a unit other than the specific unit, the Authorized Dealers are
advised to make conversion of the contracted unit into the specific unit and accordingly they will
determine the quantity of the export or import commodity.

(b) For entering code numbers on various schedules, the code lists mentioned below against each
schedule should be referred to:

(b) For entering code numbers on various schedules, the code lists mentioned below against each
schedule should be referred.

(c) At the time of filling in the forms the ADs concerned should invariably enter the relative code
numbers in the space provided for the same in the forms. The stubs earmarked for "Category" are
to be used only in cases of transactions relating to imports and invisible payments. lt is further
clarified that the stubs earmarked for "Category" are not only meant for coding of payments for
imports or invisibles made by the public sector but also for coding payments for imports or
invisibles under cash in the private sector for which separate code has been provided in Code-8. All
payments out of cash resources should be correctly correlated with those given in Code-S and code
number given accordingly. ADs shall also follow the above procedure while coding the transactions
listed on the schedules as indicated in this paragraph.

(d) The procedure indicated above shall apply mutatis mutandis to transactions under barter
arrangements and other special payment arrangements.

(e) lt should be ensured that the description of transactions given in the relevant forms conforms to
the nomenclature given in the code lists. Coding should be done with extreme care. lt is advisable
to entrust the coding work to senior responsible staff. To guard against any possible

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 Corporate Laws und Practices

misclassification, coding should be independently checked. For all amounts equivalent to Taka l- lac
and above, the checking of codes should be done by supervisory staff and concerned officer.

5. Reporting procedure for cash transaction

ADs shall report to the Bangladesh Bank particulars of all their foreign exchange transactions, i.e., all
outward and inward remittances effected, whether through their accounts in foreign currencies or
through the Taka accounts of nonresident banks. For this purpose, ADs must prepare/submit to the
Bangladesh Bank monthly summarized statements of their transactions in each currency in which a
position is maintained by them and also monthly summary statement of transactions effected on
the Taka accounts of non-resident banks.

Submission of Statements (E-returns) through online: Foreign Exchange Transaction Reporting

System Through Rationalized lnput Template (RlT)

Bangladesh Bank has developed Enterprise Data Warehouse (EDW), a central database of
Bangladesh Bank for collecting information from banks and Fls through online. This software is a
full-fledged data center. Various macroeconomic data such as import, export, remittance and credit,
etc. are centrally preserved and processed here. As per instruction of Bangladesh Bank, banks and
Fls have already started uploading various data to EDW web portal through RIT format. Various
reports are being generated by using data received from banks/ Fls through different RlTs of EDW.

ln respect of reporting foreign exchange transactions to Bangladesh Bank, the Ads shall submit the
currency-wise original copies of statements/schedules directly to their head office/principal office
by the 5th day of the following month and preserve the office copy in their own
branches/departments. The head offices may also collect soft copy of all statement and schedules.
By consolidating alltransactions of branches and departments the head offices/principal offices shall
fill up RIT ( 1)T-ME-M-FRC-TRN for all Schedules and (2)T_ME_M_FRC_TRN_SUPP for all Summary
Statements and create Comma Separated Value (.CSV) files. Afterwards, all banks shall upload the
.CSV files in the EDW portal IFile Transfer Protocol (FTP) Server] of Bangladesh Bank by the 10th day
of the following month for being used by the Statistics Department, Bangladesh Bank, Head Office,
Dhaka. Here, T) Template, ME) Monetary and Economic, M) Monthly, FRC) Foreign Currency,
TRN) Transaction and SUPP) Supplementary.

Submission of hard copies or returns

The duplicate copies of statements/schedules along with the relevant forms (only required) should be
endorsed to the concerned Area Office of Bangladesh Bank. These monthly statements/schedules from
the branches should be so dispatched as to reach the concerned area office of Bangladesh Bank by the
5th day of the following month. The monthly statements/schedules, etc. from the head office/ principal
office of the ADs should likewise reach the Foreign Exchange Operation Department (FEOD), Bangladesh
Bank, Head office by 12th of the following month. For disposal of forms, instructions mentioned in Vol-1
shall be followed by ADs.

The summary statements should be furnished in :

Statement S-1 : For reporting transactions in all foreign currencies other than for transactions with ACU
member countries (Appendix-1). All foreign exchange transactions (other than transactions through ACU

445 | t', :t ,; :
 Corporate Laws and Practices

mechanism), transfers and adjustments which effect the AD's own position(s) in currency(s) should be
listed in this statement.

Statement S-2 : For reporting transactions with ACU member countries under ACU mechanism (ACU
Dollar and ACU Euro) (Appendix-2), All purchases and sales, exchanges, transfers and
adjustments under ACU mechanism hich effect the AD's own ACU currency position
should be listed in this statement.

Statement S-4 For reporting transactions in Taka accounts of non-resident bank branches and
correspondents held by ADs (Appendix -3).

Statement S-5 For reporting transactions in Barter and Special Trade Arrangement Accounts
(Appendix-4).

Statement S-6 For reporting transactions of sales and purchases of approved foreign currency notes.
This statement shall be submitted in duplicate along with the usual returns as per
prescribed proforma {Append ix-5).

Statement FCS-7 : For reporting transactions of personal foreign remittances of Bangladesh nationals
working or residing abroad (Appendix-6)'

Statement EFCS-8 : For reporting transactions in ERQAs of exporters of goods and services (Appendix-7)

Statement S-9 : For reporting transactions in foreign currency accounts of resident corporate entities
as mentioned in Para 16.B (Appendix-8).

Statement S-1,0 : For reporting ADs transactions with the units of EPZsIEZs territories (Appendix-9)

Statement S-l-1 : For reporting OBUs transactions with the units of EPZs/EZs territories and other
transactions of OBUs (Appendix-10) .

Statement S-l-2 For reporting transactions of Money Changers (Para 24) [To be submitted by ADs on
behalf of the money changersl (Appendix-11).

Statement S-13 For reporting transactions in the foreign currency accounts of other resident entities
as mentioned in Para 16.C (Appendix-12).

5. Compilation of Summary Statements

(a) Each summary statement will be an abstract of the ADs ledger account and will consist of total
under specified heads. Opening and closing balances should be added making each summary a

complete and balanced statement.

(b) ADs shall complete only one S-4 statement for each month in which consolidated figures of all non-
resident Taka bank accounts maintained with them shall be provided. lt will not be necessary to
complete a separate S-4 statement for each non- resident Taka bank account.

446 lij*g*
 Corporate Laws and Practices

(c) Reporting procedure under commodity exchange agreements: While reporting transactions under
various commodity exchange agreements the banks designated for handling such transactions shall
follow the procedure outlined below:

(i) The designated banks maintaining barter accounts shall submit country-wise consolidated S-5
statement covering all the barter accounts in respect of a particular country. ln other words,
separate monthly returns for each barter account with a particular country need not be
submitted.

(ii)The branches of the designated banks which do not maintain barter accounts will not be required
to submit the S-5 statement to the concerned Area Office of Bangladesh Bank. These branches
shall report the transactions along with the relevant forms to the designated branch which shall
be responsible for consolidating all transactions in the summary statement for submission to the
Bangladesh Bank along with the relevant forms and schedules.

7. Supporting Schedules and Forms of the Summary Statement (S1 to SG)

To support the details of the totals entered in the summary statements, every statement must be
accompanied by schedules and the relative forms as indicated in the summary statements. Only
required forms are to be submitted to Bangladesh Bank (Para 4, Chapter 1, Vol-1). Procedures for
disposal of Forms lMP, EXP, C and TM are described in Vol-j..

Combined headings have been provided to facilitate preparation of Schedules O&P in respect of
transactions of branches who do not maintain independent currency positions but use the foreign
currency accounts of the head/principal office/another branch, and themselves submit unbalanced
summary statements to the concerned Area Office of the Bangladesh Bank. The procedure for
preparation of these Schedules is described in sub-para (n) of para 8 below.

8. (i) Schedules

(a) Schedule A-1,, A-2 and A-3

Purchase of foreign currencies or debits to non-resident bank Taka accounts covering proceeds of
exports from Bangladesh shall be listed on Schedule A as follows:

Schedule A-1 (Appendix-13)

i) Export proceeds purchases or collection basis

ln cases where EXP Form is certified against purchase of foreign currencies or debit to non-resident
Taka account, the transaction must be listed on a relative Schedule A-1 on the basis of Online Export
Monitoring System. ln cases where EXP Form is certified against partially purchase of foreign
currency or debit to non-resident Taka account, the transaction must be listed on a relative
Schedule A-1 on the basis of Online Export Monitoring System.

44Tltlagir
 Corporate Laws und Practices

Schedule A-2 (Appendix-14)

Advance receipts for goods to be exported

ln cases where no EXP Form is certified at the time of purchase of foreign currency or debit to non-
resident Taka account, the particulars shall be listed on Schedule A-2. lf an advance remittance is
received for an export, the AD must make out an ARV(Appendix-20). Particulars of ARVs must be listed
in Schedule A-2. When the EXP Form is ultimately made out and a deduction shown for the advance
receipt, the date of the ARV must be stated on the EXP From.

Totals of Schedules A-l- and A-2 must be cast and the total of A-2 brought forward to A-1 and grand total
to be shown on the A-1 which must agree with the amount entered on the summary statement. Even in
cases where there is no certified EXP Form to be submitted with the return, an A-1" schedule should be
completed showing a nil figure and giving the total figure of A-2 making up the grand total on A-1.

Every item in Schedules A-1 and A-2 shall be supported by a certified copy of EXP Form o;"a voucher, as
applicable. Conversely, for every voucher or EXP Form, there should be an item in the appropriate
schedule. No EXP Form should be mentioned with the return against which no receipt is being reported
on the Return. lf more than one schedule sheet is used, the sheets must be serialiy numbered and
stitched together.

Separate Schedules A-L, A-2 and A-3 must be attached to the summary statement relating to each
currency. lt is not permitted, for example, to enter the forms in USD and GBP in the same summary
statement.

Schedule A-3 (Appendix-15): Exports to Myanmar under Bangladesh- Myanmar Border Trade
Arrangement Schedule A-3/O-3 has been solely designed to incorporate figures pertaining to purchase
of foreign currency against exports to Myanmar under Bangladesh- Myanmar Border Trade
Arrangement. The ADs shall attach this schedule with a separate summary statement S-1 titled as "For
transactions in all currencies (excluding ACU Dollar and ACU EURO) under Border trade arrangement
between Bangladesh and Myanmar" and schedule A-1/O-lshould be replaced by A-3/O-3.

(b) Schedule J (JlO-al (Appendix-16): lnward remittances other than export earnings under EXP

reporting method and wage earners' remittances

All inward remittances through banking channel other than export earnings under EXP reporting
method and wage earners' remittances must be listed on Schedule J on the basis of declaration on
'C' forms (Appendix-10 & 11, Vol 1)/invoice/SWtfl massages/e-mail, etc. However, currency-wise
separate list shall be made. The schedules must be attached to the relative S-1, S-2, S-4 etc.
statements and the totals on the schedule must agree with those entered in the statements.

Every item appearing in the Schedule J must be supported by form-'C' for amount exceeding
USD1O,00O or equivalent and copy of invoice/SW|FT massages/e-mail, etc. with declaration of
purpose for amount up to USD1-0,000 or equivalent. ln cases of encashment of foreign currency
instruments by Foreign Missions in Bangladesh, the name of the Mission concerned should
invariably be mentioned on the 'Form C'.

4481F*g*
 Corporute Laws and Prqctices

Online lnward Remittance Monitoring System Coding: AD shall use country of origin of ordering
customers with appropriate purpose code in Online lnward Remittance Monitoring System and hard
copy of "Form C" on the basis of "Code lists for reporting of external sector transactions by the
Authorized Dealers" to make good statistics and Bop compilation as per BpM-6

ADs must carefully note that Schedule J is to cover items OTHER THAN RECEIPTS FOR EXPORT
UNDER EXP METHOD. Export receipts under EXP methods are to be included under Schedule A and
not under Schedule J.

(c) Schedule B (Appendix-22)

Currency purchased against convertible foreign currencies is to be listed on Schedule B. Separate

schedule must be made out for each currency of which the name must be written on schedule and
be attached to the relative S-1, S-2, or 5-6 statement. Sales of currencies within the banks should be
in accordance with regulations as prescribed by the Bangladesh Bank from time to time.

(d) Schedule C (Appendix-23)

Currencies purchased from other ADs or branches in Bangladesh maintaining a separate currency
position must be listed on Schedule C. A Separate schedule must be made out for
each currency of
which the name must be written on the schedule and be attached to the relative S-1, S-2 or 5-6
statement.

(e) Schedule D (Appendix-24)

Foreign currencies purchased from and sold to the Bangladesh Bank must be entered
on schedule D
and totals entered on the relative summary statements.

(f) Schedule s E-L, E-2, E-3 and E-5 (Append ix !7-1, 17, 1.8,1-9) Forms relating
to sales of foreign currencies
to the public must be listed as under:

i) Form IMP on schedules E-!,E-2; amount should be reported in FoB value.

ii) Form TM on Schedules E-3.
iii) Demand draft on Schedule E-5; amount should be reported in FOB value.

Schedule E-1 (Appendix-17-l): Advance payments for goods to be imported: lf an advance remittance
is
maid for an import bills under LCs/contracts, the AD must entry the all information in 'online
lmport
Monitoring System' and make out the relevant schedule E-1,/P-1, and the summary statement. After final
payment of the rest of the amount of LCs/contracts, AD make out the relevant
schedule E-2/p-2 and the
summary statement for the rest amount.

Schedule E-2 (Appendix-17): tmport under LCs/contracts

Sales on account of import bills under LCs/contracts should be reported when the transactions are put
through the currency account on receipt of irnport documents and not on the basis
of retirement of bills
by the importers. AD must entry the all information to Online lmport Monitoring
System and make out
the relevant schedule E-2/p-2 and the summary statement.

449 1t;3 * 9.,:

 Corporate Laws und Practices

Schedule E-3 (Appendix-18): Outward remittance other than lmport payments

All resident to non-resident transactions on the basis of declaration on 'TM'forms (Appendix-519,Yol]-)

other than import payments must be listed on

Schedule E-3, separate list being made for each currency. The schedules must be attached to the
relative
S-1, S-2, S-4 etc. statements and the totals on the schedule must agree with those entered in the
statements.

"Online 'Form TM' Monitoring System" Coding

AD shall use country of origin of beneficiary with appropriate purpose code in 'Online TM monitoring
System' and hard copy of 'Form TM' on the basis of Code lists for reporting of external sector
transactions by the Authorized Dealers to make good statistics and BOP compilation as per BPM-6'

Schedule E-5 (Appendix-19): lmport under Myanmar under Bangladesh- Myanmar Border Trade
Arrangement
Schedule E-5/p-5 has been solely designed to incorporate figures pertaining to purchase of foreign
currency against import to Myanmar under Bangladesh-Myanmar Border Trade Arrangement. The AD
Shall attach this schedule with a separate summary statement S-1 titled as "For transactions in all
currencies (excluding ACU Dollar and ACU EURO) under Border trade arrangement between Bangladesh
and Myanmar" and name of schedule E-5/P-5 should be replaced by E-tlP1,.

As with schedule A, a separate schedule must be made out for each currency and attached to the
respective S-1 , S-2, S-4 or S-5 statement. For every item listed in schedules E (excepting E-5) there must
be a payment form (lMP or TM, as appropriate to the transaction)'

(g) Schedule F {Appendix-25)

Currencies sold against purchases of other foreign currencies is to be listed on schedule F. Separate
schedule must be made out for each currency of which the name must be written on the schedule
and be attached to the relative S-1, S-2 or 5-6 statement. Purchases of currencies should not breach
the conditions/ restrictions prescribed by the Bangladesh Bank from time to time.

{h) Schedule G (Appendix-26)

Currencies sold to other AD or branches in Bangladesh maintaining a separate currency position

must be listed on Schedule G. A separate schedule must be made out for each currency of which the
name must be written on the schedule and must be attached to the relative S-1. S-2 and 5-6
statements.

(i) Schedule H (Appendix-27)

Currencies bought (including cover fund purchases against wage earners' remittance) against credits
to non-resident bank Taka accounts must be entered on Schedule H. A separate schedule must be
made out for each currency and attached in duplicate to the relative summary statement S-1 or S-2
and total amount of currency shown on the schedule must agree with item no. 3 on the purchase
side of the relative summary statement while total of Bangladesh Taka
figures must agree with the totals of item 4 on credit side of S-4 statements.

450 1F*5:*
 Corporate Laws and Practices

(j) Schedule K (Appendix-34)

The schedule K is not related to the Summary Statements S-1, S-2 or S-4 (paragraph 1g below)

(k) Schedule L (Appendix -28)

Debits to non-resident bank Taka Accounts covering transfers to other nonresident bank Taka
Accounts must be listed on Schedule L and the total amounts of Taka must agree with the totalon S-
4 statement, The schedule should be submitted to the Bangladesh Bank in duplicate with the
relative summary statements.

(l) Schedule M (Appendix-29)

Debits to non-resident bank Taka Accounts against sales of foreign currencies must be listed on
Schedule M and the total must agree with the amount entered on S-4 statement. Thus, for example,
if US Dollars are sold to a US bank against debit to that bank's non- resident Taka account, the US
Dollar will be reported against item No. 3 on the sales side of the S-l- statement for US Dollar. The
schedule should be submitted to the Bangladesh Bank in duplicate with the relative summary
statements.

(m) Schedule N (Appendix -30)

The closing balances of the non-resident bank Taka Accounts must be listed on Schedule
N. They
should be grouped according to countries or currency groups. The final total must
agree with the
amount entered for closing balance on the S_4 statement.

(n) Schedules O & P (Appendices -31 & 32)

Branches that do not maintain independent currency positions but operate

on the foreign currency
accounts of their head office/principal office/another branch are required to submit
to the Area
office of the Bangladesh Bank unbalanced summary statements s-1, s-2 etc. Their transactions
eventually reflect in the relative currency accounts although not in the same reporting period.
The
transactions on account of branches booked in the currency account are reported on schedule
o&
P.

The branches operating on head office/principal office/another branch account will

continue to
prepare the summary statements in the usual manner but prepare
the supporting schedules in
quadruplicate. The originals, duplicates and triplicates of these schedules
after deleting o-1, o-2, o-
3 and o-4 from the headings and similarly after deleting P-l, p-2, p-3 and p-5 respectively
will be
sent along with the summary statements to the concerned Area office of the Bangladesh
Bank. The
quadruplicate after deleting A-1-, A-2, A-3, J, E-1-, E-2 and E-3 from
the heading will be sent to the
office of the Authorized Dealer on whose foreign currency account they operate.

The AD whose currency account has been operated upon shall amend
the Schedules 0-L, a-2, o-3,
o-4,P-1',P-2,P-3 and P-5 received from the branches by deleting such entries which
have not been
booked during the reporting period and adding those of the previous period
which have been
booked during this period. The total of the amended schedules C.-L, o-2,
o-3, & o-4 shall be iisted
on Schedule o and the total of SchedulesP-1-,P-2, P-3 and p-5 listed on Schedule p
for each branch.
The aggregates of Schedule O and P should respectively match with items
7 of purchase and Sale
sides of the summary statements S-1, S-2 and items 6 of Purchase and
Sale side of the Summary
Statement S-4.

451
'-^l
l ,,
 Corporute Laws und Practices

(o) Schedule R (Appendix-33)

bank Taka
Credits to non-resident bank Taka accounts covering transfers from other non-resident
accounts must be listed on Schedule R and the total amounts of Taka must agree with
the total on S-
4 Statement. The schedule should be submitted to the Bangladesh Bank in duplicate with the
relative su mma rY statements'

(p) Opening and Closing Balances

The opening and closing balances are to be taken from the currency accounts in
the books of the
AD. The abbreviations Cr. or Dr. on the summarized statements are intended to signify
:

in own books'
Cr.- Credit balances with agents or correspondents abroad as shown by Debit balances
in own books'
Dr.- Debit balances with agents or correspondents abroad as shown by Credit balances

Balances of customers' foreign currency accounts should be excluded from the Authorized Dealer's
ba lances.

8(ii) Reporting of foreign exchange transactions on account of Goods and Services

(a) All resident nonresident transactions other than those of related with export/ import of
to
merchandise goods are to be listed in the relevant statement and schedules J or E-3 etc' and
transactions on account of export/import of merchandise goods shall be Iisted in the relevant
Schedules A-t/213 or E-1,/215 etc.

(b) Merchandise Goods

For being reported as transactions of merchandise goods, the following three conditions are
to be

met :

(i) Changing of economic ownership between a resident and a non- resident

(ii) Movement of goods must be custom certified and ;

iii) Must cross the border (Excluding movements of goods through postal and courier services
which should be reported in schedule J or E-3)

lf the above three condition are met, the transactions shall be treated as transaction of merchandise
goods and hence shall be reported in schedule A-tlzl3 (for exports) or E-tl2/5 (for imports)'
lf the
above three condition are not met, such transactions shall be listed in Schedule J or E-3 etc'

(c) lf import/invisible payments are funded through purchase of foreign currency from interbank, the
following procedures are to be adhered to :

i) The seller bank shall report the transaction in schedule "G" with foot note.
"C" with foot
ii) The buyer bank who finally remits abroad shall report the transaction in Schedule
(for import) or in Schedule E-3 (for
note. Besides, the same shall be reported in Schedule E-2
invisible).

452 1tr],:i:*
 Corporate Laws und Practices

(d) Reporting of goods for processing: CMT basis exports (EXP) must be listed on schedule J & E-3.
Goods received (FoB gross value)should be reported on schedule E-3 and value of goods exported (
FOB+CMT) shall be reported in schedule J.

(e) All resident to resident transactions of goods and services in foreign exchange
[between enterprises
in Bangladesh outside EPZs/EZs and enterprises in EPZs/ EZs, EpZs/EZs enterprises to EpZs/EZs
enterprises (within same or olher EPZ/ EZ), EPZs/EZs enterprises to enterprises in Bangladesh
outside EPZ;/EZi, Bangladesh enterprises to Bangladesh enterprises, Bangladesh enterprises to
KAFCO (vice versa) should be reported without Schedules at others column in relevant Summary
Statements.

8(iii) Reporting International Cards Transactions

ADs shall report transactions of international cards through "lnternational Card Monitoring System,,
operated by Bangladesh Bank as mentioned in Chapter 19, Vol_1.

For reporting to Statistics Department, Bangladesh Bank, Card division of the Head office/Country
office of ADs shall prepare and report (consolidated) purpose wise and country-wise transactions
(receipts from acquirers/payments by issuers) in foreign exchange in the relevant
schedules J/E-3
and Statement S-1 on behalf of Head office/Country office for use of international cards (debit,
credit, prepaid, virtual and others) on the basis of settled transactions under appropriate head.
However, AD branches shall prepare respective Statements (such as s-1 to s-l_3, FCS-7,
EFCS-8)
considering/reflecting such transactions as transfer/ adjustments in relevant summary statements
(as purchase or sale, as the case may be) without schedules under
appropriate head on the basis of
settled transactions. While preparing schedules by Card Division, appropriate purpose code shall
have to be used. For example, in case transactions against travel purpose (receipts from
acquirer/
payments by issuer), relevant travel purpose code shall be used. ln case
of roaming bill settled by
international cards, card division of Head Office/Country Office shall report in relevant
statement S-
1 without schedule under appropriate head for resident to resident (within reporting economy)
tra nsactions.

To mention, payment against international cards issued for the executives of EpZ/ EZ enterprises
shall be considered in Statement S-10/S-11 as adjustment/transfer by ADs/OBUs while
Card Division
of the concerned bank shall report such transactions in the schedule E3 and Statement S-1.
Likewise,
payment against international cards issued from the balance of ERe account
of a non Epz/Ez
enterprise/balance of wage earners' FC account shall be considered in the statement EFCS-g
/FcS-7
as adjustment/transfer by the ADs while Card division of the concerned bank shall report
such
transactions in the schedule E3 and Statement S-1. when the country, currency and purpose
are
same, ADs shall list consolidated single entry in the relevant schedules (J/E3) for
transactions
through cards. However, reporting to
Statistics Department shall be through Rationalized tnput Template (Rlr) only.

8 (iv) Receipts/payments against services including BPo : Appropriate purpose code shall be used for
reporting resident to non-resident foreign exchange transactions against providing information
technology enabled (lTE) services (including BPo). For reporting such transactions ADs
are advised
to use the relevant schedule and code from the set of codes provided for the purposes of computer
data processing, hosting services, etc. ADs shall maintain copy of 'C' Forms /invoice/SW|FT
massages, e-mail etc, as per direction of FEPD/FEOD in support of such transactions.

453 11],rg*
 Corporate Lsws und Pructices

9. Foreign currency notes

ADs are asked not to include their holdings of foreign currency notes in the balances reported on the
S-L and S-2 statement and they are to omit their transactions in currency notes completely except
where such transactions result directly in entries on their currency accounts. Examples of these are
when an AD under special license imports bank or currency notes from abroad paying for them by
drawing on the currency account and alternatively when an AD sends a batch of currency notes
abroad to be credited to his account. ln the first instance the transaction should be treated as sale of
currency and reported on TM Form which will be included in Schedule E-3. ln second case the
Authorized Dealer will report the purchase of the currency under the head "Purchases covering
remittances from abroad other than for exports" on the relative Summary Statement. Again, if a
traveler obtains USD 1O0O TCs and USD 500 in currency notes as his travel quota, the transaction
should be included in Statement S-1 as the sale of USD 1000, the transaction of USD 500 in currency
notes being omitted.

10. Method of dispatch of Statements to the Bangladesh Bank

The Statements being dispatched to the Bangladesh Bank should be put in separate envelopes or
packages, i.e., each of the s-1, s-2, s-4, s-5, s-6, FCS-7, EFCS-8, S-9, S-10, S-11, S-l-2 & S-13
statements separately. On the outside of the envelopes or covers, preferably on the back in the top
left corner, the name of the AD, the last date of the respective period, the type of statement
enclosed and the currency should be shown. Example:

XYZ Bank
Period ended 31.12.2017
Statement S-L
Currency USD

11. Reporting of transactions under FC accounts other than those of Bangladesh nationals working or
residing abroad

Deposits to and withdrawals from the foreign currency accounts shall not be included in the usual
Summary Statements viz., S-1-, S- 2 etc. of the ADs. Withdrawals made from these foreign currency
accounts for payment in Taka in Bangladesh should, however, be treated as inward remittance and,
therefore, the amount involved should be shown as purchase in the usual summary statements viz.,
S-1, S-2 etc, in the others column without schedules.

This is to mention here that deposits to and withdrawals from the foreign currency accounts of
resident corporate entities [(other than those of EPZIEZs (A-Type, B-Type, C-Type)], other resident
entities, EReAs of exporters of goods & services, shall be reported in the usual Summary Statements
viz., S-9, S- 13 and EFCS-8 of the ADs as the case may be, as shown in the box below.

454 1f);g*
 Corporate Laws and Pructices

Bos : Biffnept Tr-prs sf F,{, A*roumt:. nnd Rr}el'ant Sunr:mart Srilmmesf

Ff. Acsowrts sf Entirieg Selrnrnalr- Para ,tppexdis

.$tntem*at

Ff. are*rcntr nf Ba*Ellad*sh natise,atrs EFCS -7 tb.{ 6

x'*rkingl tr t?iidi!ry abrrrxd.

Ff. *cr*rurts of rexidesrf rElFcElE mtitie.; :-: g6_8 (1

D

Epeuedx.ur&r tperial peturi*',iw of

Bargkde*h Bexk

FC a*s{xlts fif re€idEaf 5-I -" 16"fl 1l

iadir,i*:a1*,icctpmxte eugitier opened a;srder

g*nem! penniilion *f Basg,iede,ik E*nk

urerctinnedrn liectisa n. m. \T" Ch 1l"V*t-1

ffi-*_Ar, af empcn*mx { gs*d& arld *etltceti EFrS-S llrF)

Eotihec ef EFIa,EZT d:rsu&,{.& c.-lf'l 14 v

Eg$ities sf EPZt,€E &meh" OBUE 5.l1 1{ 10

12. Reporting of transactions of personal foreign remittances and transactions in FC accounts of

Bangladesh nationals working/residing abroad.

(a) Reporting of daily wage earners' remittances through RIT

The head offices of ADs shall submit i.e. upload daily transaction of wage earners' remittance on
the basis of disbursement to beneficiary accounts in a consolidated form covering figures from
all AD branches/departments in currency-wise and district-wise through RIT named
T_ME_D_REMITTANCE (T) Template, ME) Monetary and
Economic, D) Daily) maintained by Statistics Department, Bangladesh Bank, Head Office, Dhaka
on the following day before 11 A.M. The AD must satisfy itself about full coverage of all NRB
(Wage earners) remittances data in this template and in summary statement FCS-7 with specific
sched u les FCR-I.,2,3,4.

(b) Reporting of Monthly Wage Earners' Remittances

For reporting personal foreign remittances of Bangladesh nationals working/ residing abroad
and transactions of all foreign currencies and under foreign currency accounts of such
Bangladesh nationals through all ADs, head offices of ADs shall submit separate monthly
Summary Statements FCS-7 (Appendix-6) for GBP, USD, EURO, JPY etc. in consolidated form

455 1,.,r
 Corporate Luws and Practices

covering figures from all AD branches and departments to the Statistics Department, Bangladesh
Bank, Head Office, Dhaka by L0th of the following month through RIT in the EDW's FTP Server.

The figures reported in summary statements must be supported by Schedules FCR- 1-, 2, 3 eLc.
and FCP-I, 2,3, etc. along with relevant lMP, TM Forms. lnward wage remittances received for
crediting F.C. accounts or in other forms shall be reported in respective currency in FCS-7
(Appendix-6) without converting to any other currency.

Total wage earners' remittance of reporting month (FCR-1+FCR-2+FCR-3+FCR-4) should be equal

to sum of daily wage earners' remittance of the same period. For reporting the transactions of
wage earners' remittances, the country code should be reported as per source of wage earners'
country name (country of origin of wage) wherever the cover fund of remittances come from.

(i) lnward remittance receipts/deposits through banking channel into FC accounts and FDD/TTs
purchased from Bangladesh nationals working/residing abroad for their fami!y maintenance
shall be reported in FCR-1.

(ii) lnward remittances received through Taka AIC of non- resident bank branches,
correspondents, exchange houses and subsidiaries abroad shall be reported in FCR-2 (on the
basis of disbursement to beneficiary' accounts). The same i.e. amount under FCR-2 shall be
reported in both deposit and withdrawal sides of statement FCS-7 for balancing. Noted that,
the amount of FCR-2 is contra entry of item no. 7 (against disbursement amount of Wage
earners' remittances) debit side of statement S-4.

(iii) Local deposits into foreign currency accounts viz. draft, TC, cash etc. and purchases of
cash/TC, draft etc. from Bangladesh nationals working/residing abroad shall be reported in
FCR-3 and

(iv) Postal inward remittances shall be exported in FCR-4. The above transactions shall be shown
in Summary Statement FCS-7. Deposit in foreign currency account or purchases of
cash/TC/draft/TT etc. cover fund receipts from Exchange Houses (as purchases of cover
fund) from anywhere, country should be reported in FCR-tl2/3/4 according to source
country of remittances.

On disposal of foreign exchange from wage earners' foreign currency accounts, the resultant
should be reported in Schedule FCP-1 for import payments, invisible payments shall be reported
in FCP-3 and in FCP-6 for purchased by ADs (other than cover fund purchase for credit to Take
account of non-resident bank branches or correspondents which shall be reported in schedule
H). The contra entry of FCP- 6 shall be reported in S-1 (purchase side item no.8) for draft, TC etc.
and in 5-6 (purchase side item no. 4) for cash. Separate FCP-6 shall be reported for draft, TC and
cash.

Besides, transfer abroad from FC accounts of

NRBs (Bangladesh nationals working/residing
abroad) shall be reported in Schedule FCP- 8 (Appendix 6-lX) while transfer from such accounts
to FC accounts with other banks in Bangladesh
shall be reported in FCP-9 (Appendix 6-X).

Transactions which are settled through the ACU mechanism utilizing funds from the foreign
currency accounts of Bangladesh nationals working abroad should be reported in Summary

456 lF.t*.1:
 Corporate Lsws and Practices

Statement S-2. The supporting schedules (E-2, E-3 etc.) however should be separately and
distinctly identified by means of a suitable inscription according to the transaction's mode of
financing viz. cash, foreign currency funds of Bangladesh nationals working/residing abroad as
the case may be. The summary total must agree with the total of the schedules.

13.(a) Reporting of inland LC settlements

Payments against inland LCs in foreign exchange (See Para 40, Ch-7, Vol-l-) shall be reported in
Summary Statement S-1 against serial no. 8 on sales side as "payment against inland LC". The
recipient Authorized Dealer shall report the receipt against serial no. 8 on the purchase side of S-1 as
"receipt in settlement of inland LC". For purchase and sale of fertilizers between Bangladesh and
KAFCO two purpose codes 6016 and 20L6 (as the cash may be) shall be used in purchase side and
sale side of Summary Statement S-1 respectively.

(b) Reporting of transactions under ERQ Accounts of the exporters of goods and services

Transactions in ERQ Accounts of exporters of goods and services shall be reported in the following
manner:

(1) Head Offices of ADs shall prepare and submit (through RIT) Monthly Summary Statements
(Appendix 7) for USD, GBP, EURO, JPY etc. in consolidated form covering figures from all AD
branches containing all transactions under the ERQAs of goods and services exporters.

(2) The amount in foreign currencies (except ACU Dollar/ACU Euro) credited to retention quota
account (out of repatriated export proceeds) shall be shown under serial no. 8 in the sales side
of S-1 as "Transfer on account of exporters retention quota to EFCS-8". As a contra, this amount
shall be shown in the deposits side of Statement EFCS-8 against serial no. 1. Schedule EFCR-1
(Appendix-7-l) shall accompany this statement.

(3) The amount in ACU Dollar/ACU Euro credited to retention quota account out of export proceeds
repatriated under the ACU mechanism shall be shown in the sales side of S-2 against serial no. 8
as "Transfer to S-l- on account

of exporter's retention quota". Simultaneously, this amount will be shown in the purchase side
of S-1 against serial no. 8 as "Receipt from S-2/ S-4/S-5 on account of exporter's retention
quota." The same amount shall be reported as contra in the sales side of S-1 (against serial no.
8) and EFCS-8 as described in sub-para (2) above.

(4) Retention quota against export receipts through non-resident Taka account shall be credited by
the AD to the retention quota account by selling equivalent Pound Sterling/US Dollar/ Euro/
Japanese Yen, which will be shown in the sales side of S-1 against serial no. 8 as "Transfer on
account of Exporter's retention quota". This amount shall be reported in the deposits side of
EFCS-8 against serial no. 1 along with supporting schedule EFCR-1 as mentioned in sub-para (2)
above.

(5) For barter transactions, the same procedure as described under (3) above shall apply, except that
the transfer to 5-L will in this instance be from S-5 rather than S-2.

(6) The portion of retention quota maintained as term deposits is to be shown separately at item no
L on the deposit side of EFCS-8 in the space pr:ovided for therein.

457 1? tt ,; *
 Corporate Laws and Practices

(7) The amounts debited from the exporters' retention quota accounts for imports and other
expenses by the exporters shall be reported in the withdrawal side against nos. L and 2
enclosing schedules EFCP-1 and EFCP-2 respectively (Appendices 7-ll and 7-lll).

(8) Debits to retention quota accounts for payment settlement through ACU shall be shown in the
withdrawal side of EFCS-8 at sl. no. 3 as "Transfer to S-2 for settlement under ACU" and its
contra on the purchase side of S-2 against serial no. 8 would be "Receipt by way of transfer from
EFCS-8 for payment through this account".

14. Reporting of Transactions of EPZ/EZ Units

A. Foreign exchange transactions (exports, imports, invisible receipts and payments, etc.) of
EPZs/EZs (A-Type, B-Type, C-Type)and other non-processing & service providing entities shall be
separately accounted for.

The ADs shall open notional account of EPZs/EZs for their EPZs/EZs constituents to which all
foreign currency receipts/payments of the EPZs/EZs constituents shall be credited/debited.
Deposits into/withdrawal from the notional account shall not be taken into the :"egular exchange
position of the AD.

For reporting foreign exchange transactions of EPZs and EZs constituents conducted through
ADs, statements S-10 shall have to be used while Statement S-1-1 shall be used for reporting of
foreign exchange transactions of EPZs/EZs constituents conducted through OBUs. ln both
statements relevant schedules shall be attached in applicable cases. Similarly, appropriate
existing codes shall used for reporting transactions of various nature of such constituents.

ADs/OBUs shall maintain separate register/ledger for reporting foreign exchange transactions of
EPZs/ EZs entities. Besides, EPZs/EZs shall be treated as separate economic territory or zone.

B (a) Transactions of EPZsI EZs entities through ADs

For reporting foreign exchange transactions of EPZs/EZs constituents with abroad, within same
EPZ/EZ, with other EPZs/EZs, with other areas of Bangladesh, ADs shall use Summary Statement S-10
with relevant schedules.
However, schedules shall not be attached for reporting transactions within Bangladesh (within same
EPZor EZ, other EPZs or EZs, other areas of Bangladesh). Transactions with abroad shall be reported
with schedules.

(b) Transactions of EPZs/ EZs entities through OBUs

For reporting foreign exchange transactions of EPZs/EZs constituents (Type A units) with abroad,
within same EPZ/EZ, with other EPZs/EZS, with other areas of Bangladesh, OBUs shall use Summary
Statement S-11 with relevant schedules. However, schedules shall not be attached for reporting
transactions within Bangladesh (within same EPZ or EZ, other EPZs or EZs, other areas of
Bangladesh). Transactions with abroad shall be reported with schedules.

(c) The schedules for reporting transactions of EPZs/EZs entities (by ADs/ OBUs) with abroad shall be A-
1-, A-2, J, E-2, E-3 etc.

458 1i'ritr:
 Corporate Laws and Practices

(d) Transactions of non-processing entities of EPZsIEZs with abroad through ADs

Foreign currency receipts/payments from/to abroad in favor of BEPZA/BEZA or any other non-
processing entities i.e. developers, various service providers trade bodies, banks, warehouses, labor
organizations, health, education, amusement, offices of any other organizations etc. shall be
reported in the relevant summary statement S-10 and schedule J/E-3.

(e) OBUs own transactions with non-residents

OBUs own resident to non-resident transactions, receipts/payments from/to abroad shall be

reported in the relevant statement S-11 and schedule J/E-3. Transactions of IOO% foreign owned
non-processing organizations through OBUs shall be reported in the relevant summary statement S-
L1 and schedules J/E-3.

(f) For reporting of exports, imports, other receipts/payments supporting documents like invoice should
be attached where applicable.

(e) For reporting of ACU transactions in S-10 & S-11, ADs & OBUs shall use ACU currency code 9g for
reporting ACU transactions in ACU Dollar and 47 for reporting ACU transactions in ACU Euro. For
transactions of EPZs/EZs units with Bangladesh through ADs/OBUs shall be reported without
schedules in relevant other column.

C. Transactions of exports, imports, invisible receipts & payments of enterprises outside EpZs/EZS in
Bangladesh with EPZs/EZs enterprises shall be taken into regular exchange position of ADs and shall
be reported in the summary statement of S-L without Schedules in relevant others column.

Exports, imports, invisible receipts & payments of EPZs/EZs enterprises with Bangladesh enterprises
outside EPZs/EZs or Domestic Tariff Area (DTA), Export Oriented lndustry (EOl), lnter-zone and lntra-
zone of EPZs/EZs shall be taken into position of EPZs/EZs enterprises notional account and shall be
reported in the summary statement of S-10 , S-11 without schedules in relevant others column.

D. The portions of export proceeds or other receiptsof EPZs/EZs enterprises enchased in Taka shall be
taken into the regular exchange position of the ADs and shall be reported in the Summary
Statement of 5-L without schedules in others column by debiting to the Notional Account and contra
entry should be reported in the summary statement of S-1-0,S-11- without schedules in relevant
others column.

15. Amalgamation of cash holdings pertaining to FC accounts of customers and regular accounts of
ADs
ADs may amalgamate stocks of foreign currency notes purchased from customers (and taken into
exchange position) and those credited into FC accounts of customers in so far as separate accounts
are maintained of these stocks. They may also transfer foreign currency notes from one account to
another with a corresponding transfer of funds from or to the special accounts to or from the special
accounts relating to balances of customer,s FC accounts.

Transfer of foreign currency notes from the special accounts relating to balances of customer,s FC
accounts to the exchange position of the Authorized Dealer should be reported in 5-6 Statement
against item No. 4 (other state) and the transfer of the corresponding amount from the ADs
regular
account to the aforesaid special account as sale against item No. 8 of the S-l- statement. Similarly,

459iFrg*
 Corporate Laws snd Pructices

transfer of foreign currency notes from the exchange position of an AD to the special account
relating to balances of customer's FC Accounts should be reported as sale against item No'4 (others
state) ofthe 5-6 Statement and the corresponding transfer ofthe fund from the said special account
to the regular account of Authorized Dealer should be reported as purchase against item No' 8 of
the S-L Statement.

16. A. Transactions relating to personal foreign remittances of Bangladesh nationals working abroad
or residing abroad

Transactions relating to personal foreign remittances of Bangladesh nationals working abroad or

residing abroad along with deposits into and withdrawals from FC accounts of such Bangladesh
nationals shall be reported in Statement FCS-7 (appendix-6) along with Schedules FCR and FCP as
under:

(a) Deposits

(i) FCR-1 (Appendix-6-l)- Country-wise wage remittances from Bangladesh nationals working
abroad or residing abroad through banking channel (deposits into FC accounts, purchases of
FDD, FTT etc.) (as mentioned in Para 12).

(ii) FCR-2 (Appendix-6-ll)- Country-wise wage remittances received from Bangladesh nationals
working abroad or residing abroad through taka accounts of non-resident bank branches or
correspondents (listed on the basis of disbursement) (as mentioned in Para 12)

(iii) FCR-3 (Appendix-6-lll)-Drafts, TCs, cash etc. locally deposited into FC accounts and purchases of
drafts, TCs, cash etc. from Bangladesh nationals working abroad or residing abroad as
mentioned in para 12.

(iv) FCR-a (Appendix-6-lV)- Country-wise receipts of wage earners' remittances through postal
channel as mentioned in para 12(bXiv).

(v) FCR-6 (Appendix-6-V)- Transfers from FC accounts maintained with other Authorized Dealers
and/or conversion from other foreign currency

(blWithdrawals

i. FCP-1 (Appendix-6-Vl)- Payment against imports and amount should be reported in FOB value'.
ii. FCP-3 (Appendix-6-Vll)-Paymentsfor invisibles.
iii. FCP-6 (Appendix-6-Vlll) Purchases by Authorized Dealer for transfer to S-1 for other than cash
/5-6 for cash.
iv. FCP-8 (Appendix-6-lX)- Transfer to abroad from FC account.

v. FCP-9 (Appendix-6-X)- Transfer to FC Accounts with other banks.

B. Reporting of transactions under FC Accounts of resident corporate entities

Transactions in the foreign currency accounts of resident corporate entities (other than of EPZsIEZs)
(industrial concerns, gas/oil/other minerals exploration companies, power generation companies,
mobile phone companies, non-bank financial institution, NGOs, microfinance institutions and other

4601fr;g*
 Corporate Laws und Practices

organizations) maintaining FC accounts with permission from Bangladesh Bank shall be reported in
Summary Statement S-9 (Appendix-S) along with the following schedules :

RFCR-I : (Appendix-8-l) : Amount received from abroad as equity capital, intra-company loan & inter-
company loan and others shall be reported in this schedule. ADs shall use purpose code on the basis of
declaration of Form 'C'/invoice/SWIFT messages, etc.

RFCP-I : (Appendix-8-lV): Amount debited for import payment in FOB value.

RFCP-2 : (Appendix-8-V) : Amount debited from for invisible payments. ADs shall use purpose code on
the basis of declaration on Form TM.
RFCP-3 : (Appendix-8-Vl): Purchased by ADs for transfer to S-1.

C. Reporting of transactions under FC Accounts of other resident entities

Transactions relating to deposits into and withdrawals from foreign currency accounts of residents
opened and maintained under general permission as mentioned in Chapter L3 (Section l, Section lll,
Section-Vl), Guidelines

for Foreign Exchange Transactions (Vol-1) [Foreign nationals residing in Bangladesh, foreign firms
registered abroad and operating in Bangladesh, Bangladesh nationals working with the
foreign/international organizations operating in Bangladesh who get their salaries and allowances in
foreign currency, local and joint venture contracting firms employed to execute projects by foreign
donors/international donor agencies, diplomatic bonded warehouses operating in Bangladesh having
limited money changing license, RFCD accounts of Bangladesh nationals, other resident entities like
airlines, shipping companies, freight forwarders who are allowed to open and maintain FC accounts
against general permission of Bangladesh Bank etc.)l shall be reported in Statement S-13 (Appendix 12)
along with the following Schedules:

RPFCR-I : (Appendix-12-ll Amount received from abroad in foreign currency accounts of other resident
entities shall be reported under this Schedule. Moreover, ADs shall use appropriate purpose code on the
basis of declaration on Form 'C'/invoices/SwIFT messages, etc.

RPFCP-I : (Appendix-12-ll): Amount debited from FC accounts of other resident entities for invisible
payments shall be reported under this Schedule. Moreover, ADs shall use purpose code on the basis of
declaration on Form TM.

RPFCP-3 : (Appendix-12-lV) Amount debited from FC accounts of other resident entities for import
payments in FOB value.

Transactions in the foreign currency accounts of airlines, shipping companies, freight forwarders
(Section Vl, Chapter 13, Vol-1) shall be reported in Summary Statement S-13 and hence shall not be
reported under S-9.

D. Transactions in the Non-resident Foreign Currency Deposit (NFCD) Accounts [Chapter 13, section-ll,
(Vol-1) and foreign currency accounts of the following entities shall be excluded for reporting under S-9
or S-13:
1) Foreign national residing abroad;

2) Foreign firms registered abroad and operating abroad;

3) Foreign missions and their expatriate employees;

461 li';: ,;*

 Corporate Laws and Practices

4) lnternational bodies/organizations and their expatriate employees as stated in the Code Lists titled
'Reporting of External Sector Transactions by the Authorized Dealers' published by Bangladesh Bank
(Code-3, No. 2701-
27es).

17. ADs themselves shall make arrangements for printing of Forms and Returns from time to time which
should conform exactly to the size, color, contents and format as prescribed by the Bangladesh Bank, in
the following manner:
(a) The stubs provided on the forms EXP and IMP will be filled in by Authorized Dealers in the
following manner
The first four boxes of EXP and IMP number will bear AD's branch code assigned by the Bangladesh
Bank and the next five boxes are meant for mentioning the serial number of 'Register of lssuing
Forms' maintained at the bank and the last two boxes are meant for mentioning the last two digits
of the year of registration.
(b) Forms and Schedules other than Forms TM, IMP and EXP shall not bear any serial number.
(c) Size of different Forms, Statements, Schedules etc. shall be as under:

Name of Forms, Statements, Size

etc. Length Breadth
Forms & Statements 36 cm 23 cm
All Schedules 30 cm 2L cm

(d) Papers of the following colours should be used for printing the various Summary Statements:

ADs shall take utmost care in the printing of the Forms exactly as prescribed, and should ensure
adequate supply of Forms to their customers to avoid any complaint of non- availability/scarcity.

18. Operations on private non-resident Taka account

ADs must submit in Schedule K (Appendix-34) quarterly return of operations of private non-resident
Taka accounts of non-bank clients (i.e. other than Taka accounts of non-resident banks which are
reported on S-4 Statement). The schedules shall reach the concerned Area Office of the Bangladesh
Bank by 12th April, 12th July, 12th October and 12th January. Only totals for all such accounts of
credits and debits and debits passed during the period and of the balances are required. Schedule K
consists of the following categories:

(a) Private non-resident Taka accounts of Bangladesh nationals other than bank branches and
correspondents.
(b) Private non-resident Taka accounts of non-Bangladesh nationals excluding bank branches and
correspondents.

19. A. Submission of statements relating to imports

Head Offices/Principal Offices of the ADs are required to submit the following statements (hard
copy/soft copy as required by the department) relating to imports to the General Manager, FEOD,
Bangladesh Bank, Head Office, Dhaka:

462 1tr'rtgi:
 Corporute Laws und Practices

(a) Statement of outstanding foreign payment commitments: Monthly statement of outstanding

payment commitments abroad in the prescribed proforma (Appendix-35) as of the month end,
reaching the Bangladesh Bank

by the 15th of the following month. Position in regard to public sector including TCB and the position
in regard to the private sector should be shown separately, using separate forms for each of the two
groups.

(b) Monthly statement of commodity-wise import LCs (71 items): Monthly statement (Appendix-36)
showing commodity-wise value of import LCs opened, cancelled, settled during the month and
outstanding as of end of each month to reach the Bangladesh Bank by the 10th of the following
month.

(c) Commodity-wise (26 itemslweekly statement of LC opened and settled (Appendix 37)

(d) Weekly statement of importers' information of the 25 essential commodities as stated in

Appendix 37 ( Appendix 38)

(e) Commodity-wise (34 items) statement of LC opened and settled (Appendix 39).

(f) Monthly statement of commodity-wise outstanding/unsettled imports (Appendix 40).

(g) Monthly statement of commodity-wise imports without LCs (Appendix 41).

(h) Monthly statement of maturity of payment under deferred payment import LCs/contracts
(Appendix 42).

19.B. Half yearly statement of receipts of grants etc. for voluntary activities in Bangladesh in terms of
Foreign Donation (Voluntary Activities) Regulation Act 2016 ( Appendix 43)

to submit the above statement (hard copy/soft

Head Offices/Principal Offices of the ADs are required
copy as required by the department) to the General Manager, FEOD, Bangladesh Bank, Head Office,
Dhaka by 15th instant of January and July of each year.

19.C. Head Offices/Principal offices of the ADs are also required to submit the following statements to
the General Manager, Foreign Exchange Policy Department, Bangladesh Bank, Head Office, Dhaka:

(a) Monthly consolidated statement of convertible taka accounts and foreign currency accounts
(Appendix 44).
(B) Monthly statement of release of foreign exchange against travel, treatment and education abroad
(Appendix 45).

20. Returns of blocked accounts and securities

ADs are required to furnish half yearly returns in the prescribed proforma (Appendix-46) to the
Bangladesh bank as of June and December end showing the balances held by them in blocked accounts.
These Return should reach the

Bangladesh Bank by the 7th July and 7th January respectively. This Return should show account holders
resident in each country separately. Similarly, half yearly Returns in the prescribed proforma (Appendix
47) showing the securities held by ADs in blocked accounts should also be furnished.

463 11'ag*
 Corporate Laws and Practices

These Returns should include the balances and securities held in non-resident accounts blocked by
orders of the Bangladesh Bank. Where there are no accounts or securities to report, nil return should be
sent. The Returns as of 30th June and 3l-st December should reach Bangladesh Bank by the 7th of July
and January.

2L. Reporting procedure for imports under foreign loans and grants, buyers' credits and
direct/deemed export bills discounting

The procedure with regard to coding as mentioned in this Chapter shall also apply to imports under
foreign loans and grants with the following modifications:

(a) IMP Forms shall be listed on a schedule bearing combined heading style EL-L/EL-2/EL-3 (Appendix
48). The schedules will be prepared in duplicate in the following manner:

(i) ln cases where no remittance is involved, the heading EL-1 to be retained and headings EL-2/EL-
3 deleted.

Reporting against import transactions under buyers' credits(short term and long
term)/approved external credits for which payment is made by foreign ienders at sight as per
payment terms, ADs shall report the transactions under schedule EL-1 through issuance of IMP
Form to Bangladesh Bank. Particulars of the EL-1 should also be reported in a separate schedule
J/O-4 together with Form C as drawing short-term loans on account of buyers' credits/approved
external credits to Bangladesh Bank. ADs should mark IMP Form, schedule JIO-4 and Form C
with bold letters "BC" or "EC" (as the case may be). while making the payment to foreign
lenders on maturity, ADs shall report the transactions as settlement of buyers' credit along with
interest and other charges using TM Form under schedule E-3lP-3. lt is noted that if lenders
bank is OBU, ADs should report the corresponding drawing/ repayments (principle along with
interest and other charges) of short-term loans on account of buyers 'credits/approved external
credits in the summary statement of S-1/S-2 without schedules in relevant others column.

(ii) ln cases of imports under reimbursable loans and credits under which payments are first made
out of Bangladesh's cash resources and are subsequently reimbursed by loan/grant giving
agency, the heading EL-2 is to be retained and the headings EL-1/EL-3 to be deleted.

(iii) ln Case of supplier's credit under which remittance of down payment is involved, the heading EL-
3 to be retained and the headings EL-1 and EL-2 to be deleted. lt should also be noted that like
EL-3, EL-1 and EL-2 bear pertinent country commodity and category codes and amount should
be reported in FOB value.

ADs shall issue IMP Form for import under suppliers' credits on acceptance of import documents and
report the transactions under schedule EL-3 to Bangladesh Bank. Particulars of the EL-3 should also be
reported in a separate schedule J/O-4 together with Form C as drawing long-term loan on account of
suppliers'credit to Bangladesh Bank. ADs should mark IMP Form, Schedule J/O-4 and Form C with bold
Ietters "SC". While making the payment to foreign suppliers on maturity, ADs shall report the
transactions as settlement of suppliers' credit along with interest using TM Form under schedule E-3/P-
3.

464lIagu
 Corporute Laws and Practices

(b) Separate Schedule should be used for each Loan/Grant. The name of the Loan/Grant should be
clearly described on the schedule in the space provided therefore.

(c) With regard to coding of Schedule s EL-1,/EL-2/EL-3, the procedure shall be as follows:

(i) The stubs on the right hand top of the Schedule should be left blank.

(ii) ln the column meant for amount the amount in foreign currency should be stated.

(iii) The existing codes as prescribed by the Bangladesh Bank including HS codes are to be used as
usual in the Schedules for coding commodity, country, department, currency etc.

Authorized Dealers shall submit Schedule EL-1,/EL-2|EL-3 relating to Loans/Grants with relative Summary
Statements to the Bangladesh Bank along with other Summary Returns in the usual manner.

d. Reporting procedure of receipt and payment of short term foreign currency loan through discounting
of direct/deemed export bills.

It is noted that if lender bank is OBU, ADs should report the corresponding drawing/repayments
(principle along with interest and other charges) of short-term loans on account of discounting of
direct/deemed export bills in the summary statement of S-1,/S-2 without schedules in relevant others
column.

22. Submission of daily exchange position statement

(A)ADs shall maintain records of their exchange position in foreign currencies as at the close of business
on each working day in the prescribed proforma (Appendix 49A, Appendix 49B). The currency wise daily
exchange position statements shall be submitted to Bangladesh Bank on the following working day
through RlT.

Banks shall maintain their overall exposures in foreign currencies (overall net exchange position) within
the 'Open position limit' at the end of the day. The open position limit is required to be approved by the
Bangladesh Bank on the basis of total capital (sum of Tier-L & Tier-2) and some other qualitative
judgement.

The proforma of exchange position has been drawn up to suit the different types of book keeping used
in different banks. The main items which may cause some difficulties are explained below. ln the event
of any further difficulty being encountered, the AD should refer the matter to the Foreign Exchange
Policy Department of Bangladesh Bank.

(B) Guidelines for Calculation and Reporting of Foreign Exchange Exposure of Bank

Foreign currency exposure of bank is defined as the sum of all foreign currency denominated assets and
liabilities. The exposure shall also include the net forward and other possible off-balance sheet items (as
decided by Bangladesh Bank) in each currency. No foreign currency denominated asset or liability can be
ignored, unless it has been explicitly agreed with the Bangladesh Bank.

465 1[]iiy.*
 Corporate Laws and Practices

Bank's overall foreign exchange exposure (i.e. overall net exchange position) is to be measured in two
successive steps: first, the measurement of the exposure in each single currency, and second, the
measurement of overall foreign exchange exposure (i.e. overall net exchange position) by aggregating
the sum of the net short positions
or sum of the net long positions whichever is higher'

(C) Calculation of Net Exchange Position in Each Currency

Bank's net exchange position in each currency shall be calculated by summing (i) net position in balance
sheet items and (ii) net position in off-balance sheet items'

Balance sheet items include spot position only. The net spot position is the difference between foreign
currency assets and the liabilities in the balance sheet. This should include all accrued income/expenses'

Off-balance sheet items include all foreign currency denominated assets and liabilities not included in
the balance sheet. These transactions are recorded in the off-balance sheet section of the book of a
bank.

Off-balance sheet items include forward position denominated in foreign currency. [\et Forward Position
in a currency represents all amounts to be received less all amounts to be paid at a future value date
under forward foreign exchange transactions including the far leg position of currency swap contracts,

Therefore, banks shall arrive at net foreign exchange position in each currency by adding (i) net spot
position and (ii) net forward position.

(D) Banks shall, thus, calculate the overall net exchange position in the following manner

(i) Calculate the net exchange position in each currency;

(ii) Convert the net positions in various currencies in equivalent USD [using the conversion rate
determined by 'Forex Reserve and Treasury management Department (FRTMD) of Bangladesh
Bank' or 'Bangladesh Foreign Exchange Dealers Association (BAFEDA)'l;
(iii) Arrive at the sum of all the net long positions;
(iv) Arrive at the sum of all the net short positions;
(v) Arrive at the overall net foreign exchange position [higher of (iii) or (iv) above]
The overall net foreign exchange position thus arrived must be kept within
the limit approved by Bangladesh Bank.

Net Exchange Position shall be worked out on the basis of opening balance and othertransactions of the
day concerned as per the local books of the Authorized Dealer. All assets take the form of debit balances
and all liabilities the form of credit balances. Therefore, if an Authorized Dealer holds a credit balance
with its correspondent/OBU book, its local book will show a debit balance, as the AD is holding an asset.
Similarly, an overdrawn position with overseas correspondent/OBU book will be shown as a credit
balance in local book. No under valuation shall take place; assets are to be marked to market in
adherence to the 'Guidelines on Foreign

Exchange Risk Management'. Balance sheet and off-balance sheet exposures are to be reported
separately but added together to arrive at overall exposures in individual currency. The nostro balances

466 1i):rgi:
 Corporate Laws and Practices

as per local book and nostro balances as per book of the overseas correspondents/OBU should be
completely reconciled. The banks shall
take utmost measures for complete reconciliation as suggested in the 'Guidelines on Foreign Exchange
Risk Management'.

(E)Submission of Daily Exchange Position Statement

Banks are required to submit two daily statements:

i. Statement stating the opening exchange position and transactions during the reporting day
(Appendix 49A);

ii. The position at the close of the day (Appendix 49B), i.e., the opening position for the next
day.

Transfer between different foreign currency accounts does not affect in day transaction. For instance,
the transfer of the balance in an NFCD account after maturity to an approved foreign currency account
does not constitute buy or sale on the part ofthe bank on the day transaction.

(F) Clarification of ltems of the Rows

1. (a). A.idl r ..rtward bills Purch

Banks may have different methods of entries for foreign and inland bills purchased which are
denominated as well as receivable in foreign currency against direct/deemed exports. lf a bank inputs
the value of any such bill purchased immediately into their currency account, then such transaction
need not be reported under this head. On the other hand, some banks debit their bills purchased to a
temporary suspense account and transfer to their currency account when the bill is realized. When the
exchange position is prepared before realization of the bill(s), the total outstanding purchased export
bill (foreign and inland denominated as well as receivable in foreign currency) should be reported under
this head. Moreover, any outstanding payment liability in foreign currency (if any) against such
purchased bills are to be deducted while reporting under the said head. After realization of bills, such
transactions are to be reported in local book and the respective head will be adjusted accordingly. The
amount of bills sent for collection shall not be reported under this head.

(b) 1.A. ib2: Placement abroad: Balances of placement to other banks, or OBUs, etc. abroad only shall
be reported under this head.

(c) 1.A.ib3 : Others : Balances of placement/deposit etc. to the OBU of own bank or other banks in
Bangladesh only shall be reported under this head by the reporting bank
(d). 1.A.ie: Others
Placement, deposit etc. to other banks in Bangladesh (interbank deposit in foreign currency), balance of
any other foreign asset not covered in 1-.A. (ia through id) shall be reported under this head. Besides,
amount of unsettled spot
purchase transactions (spot purchase transactions not yet settled/not yet booked for) against firm
deal/contract shall be reported under this head. The particulars of such balances, if reported, should be
mentioned in foot note. After settlement, such transactions are to be booked for in Iocal book and the
respective head will be adjusted accordingly.

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 Corporate Laws and Practices

(e). 1. A.iib5: FDDs, MTs and TTs pavable

Banks issue FDDs, MTs and TTs on correspondents to pay foreign currency or equivalent to the
beneficiaries by debiting their nostro accounts. lf a bank inputs the value of such instruments/transfers
immediately into their currency account, then such transactions need not be reported under this head'
lf the AD does not enter into his currency position the amount of draft or transfer until it is actually paid,
the amount need to be reported under this head. After settlement, such transactions are to be reported
in local book and the respective head shall be adjusted accordingly.

(f). 1. A.iib5: Others

Balances on account of customer account other than FC, NFCD, RFCD, ERQ etc. (out of exchange
position) and not covered by any head as mentioned above shall be reported under this head. The
particulars of such balances, if reported, shall be mentioned in footnote.

(g). l.A.iic : Back to back letters of credit-fund awaiting for remittance

Under back-to-back import system, import bills are usually paid from export earnings' Bank receives
export proceeds and retains these to settle import bills accordingly on maturity. Balance in these
accounts (e.g. back to back margin account) should be reported under this head. After payment is made
on maturity, such transactions are to be reported in local book and the respective head shall be adjusted
accordingly.

(h) 1. A.iid: Others

Opening balance of foreign liabilities not covered in 1.A (iia through iic) shall be reported under this
head. Besides, amount of unsettled spot sales transactions against firm deal/contract shall be reported
under this head. The particulars of such balances, if reported, should be mentioned in foot note. After
settlement, such transactions are to be booked for in local book and the respective head will be
adjusted accordingly.
(i) 1. Aiii: Net position of assets/liabilities

Difference between the total of items under A.i and total of items under A.ii shall be reported under this
head.

(il. 1. B: Forward aeainst contract

Banks offer forward booking banks and customers as well. Currency wise net outstanding
to other
amount of forward derived from purchase or sale from/to banks and customers against firm contract
shall be reported under this head.

(k). 1. C: Contineent liabilitv

Outstanding amount of contingent liabilities [Letters of credit, guarantees (including stand by letter of
credit, irrevocable repayment undertaking, confirmation given to other banks for LCs), acceptances,
others) are to be
reported under this head . However, the amount under this head shall not be considered for calculation
of net exchange position.
2. Spot/Cash transactions ofthe dav

Spot transaction is single outright transaction involving the exchange of two currencies at a rate
agreed on the date of the contract for value or delivery (cash settlement) within two business days'
Cash transaction is the transaction

468 1,Pr:E*
 Corporate Luws and Practices

involving the exchange of two currencies at a rate agreed where settlement takes place immediately
(usually in the same day). These are to be reported under this head. To mention, cash settlement of
forward transactions, settlement of near leg and far leg spot transaction of swap contracts (buy/sell
asthe case may be)shall be reported underthis head (Please see below).

3. Forward transactions of the dav

Forward transactions involve the exchange of two currencies at a rate agreed on the date of the
contract for value or delivery (cash settlement) at some future date (more than two business days).
Swap Transaction is a combination of a spot and a forward transaction and involves a simultaneous
purchase and sale of two currencies against each other. Forward transactions (along with those
derived from swap transactions i.e. far legs of swap transactions) of the day under report with banks
and customers are to be reported under the above head. However, sales, purchases and settlement
of such transactions are to be reported under different heads as stated in the format.

4. Settlement of o transactions

Transactions derived from swap contracts are to be reported simultaneously under sl. no. 2 (Spot
transactions) and 3 (Forward transactions) of the exchange position statement. The near leg spot
transaction of the currency is to be reported under sl. no. 2 while far leg of the swap contract is to
be reported in sl. no.3.A1 of the exchange position statement under the head of forward
transactions (purchase or sale as the case may be). On maturity, the far leg transaction is to be
reported under spot (buy/sell) as reversal of the previous one and to neutralize the forward book
position, the settled transaction amount shall be shown as forward purchase/forward sale
settlement under the respective head in sl. no. 3.A2.

5. !ssuance and settlement of continsent liabilities during the dav

lssuance and settlement of contingent liabilities during the day (which shall be excluded for
calculation of foreign exchange exposures) like letters of credit and letters of guarantee, are to be
reported under this head.

5. Total spot position of the dav

It is the sum of the spot position at the beginning (A.iii) and the total spot/cash transactions during
the day as well (2.D).

7. Total forward position of the dav

It is the sum of the opening forward position of the day (1.B) with net forward transactions of the
day (3.A1) less net settlement of outstanding forward transactions during the day (3.A2).

8. Total currencv-wise net exchange position of the dav

Net Exchange position in a currency is the sum of spot position (Row 5) and forward position (Row
6) in the respective currency.

469 1i)*g':
 Corporate Laws and Practices

9 Total of the Net Lons Positions (Column 11) and Total of the Net Short Positions (Column 12) in
equivalent US Dollar

The sum of the net exchange positions of the currencies as indicated in Row 7 having long position
shall be reported at Row 8 and Column 11 of the matrix. On the other hand, the sum of the net
exchange positions of the currencies as indicated in Row 7 having short position shall be reported at
Row 8 and Column 12 of the matrix with '-' (minus) sign.

10. Overall Net Exchange Position in equivalent US Dollar

The overall net exchange position of the bank shall be the 'total of the net long positions' or the
'total of the net short positions' (as indicated in Row 8) whichever is higher. Overall net exchange
position thus arrived in equivalent US Dollar shall be reported at Row 9 and Column 13 of the
matrix.

11. Overall Net Exchange Position in equivalent BDT

Overall net exchange position in equivalent BDT shall be reported at the Row 10 and Column 1"3 of
the matrix.

(H) Conversion Rate (Equivalent Takal

The conversion rates applied by ADs to convert various currencies are to be reported here
(equivalent BDT per respective foreign currency.) To convert currencies, ADs are advised to use
weighted average rate of USD/BDT as declared by FRTMD of Bangladesh Bank or BAFEDA.

23. Statement of Un-reconciled Nostro Entries

Head Office/Principal Office of ADs shall submit statement of un-reconciled nostro account entries
(quarter end and month end position) as mentioned in Para 7, Chapter (Vol-1). However, month-end
statement shall have to be submitted through web portal only as mentioned in Para 26(6) of this
Chapter. Quarterend statements shall include a summary of unreconciled nosto account entries as per
proforma given in Appendix 50. The same format shall be followed by ADs for preparing Monthly
Statements of Un-reconciled Nostro Entries for onward submission to Bangladesh Bank through online.

24.Reporting of Foreign Exchange Transactions of Money Changers: Money Changers operating in

Bangladesh under license from Bangladesh Bank shall report their foreign exchange transactions in
Summary Statement S-12 (Appendix-11) along with the following schedules:

Schedule MCR-1: Purchase of Foreign Exchange from Non- resident Persons (Cash/T.C) ( Appendix 11-1.)

Schedule MCP-1: Sale of foreign exchange to Bangladeshi travelers or reconversion allowed to foreign
tourists (cash) ( Appendix-L1-ll).

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 Corporate Laws and Practices

Submission of
Hard Copies: Money Changers shall submit the above statements/schedules to
Bangladesh Bank (FEOD, Head office or other office of Bangladesh Bank) through their nominated ADs
on monthly basis.

They shall have to submit the above to their ADs making them enable for onward submission to
Bangladesh Bank by L0th of the following month.

Money Changers shall also submit monthly statement of purchases and sales etc. on hard copy and soft
copy to FEOD, Head Office or other offices of Bangladesh Bank as per format given in Appendix-5/5, Vol-
1..

Submission through RIT : Besides, the nominated ADs shall submit the money changers' foreign
exchange reporting statements/returns (S-12) to their Head Office. The Head Office of the ADs shall
submit the statements/returns through RIT to the Statistics Department, Bangladesh Bank, Head Office
Dhaka by 10 of the following month.

25. Return on Foreign Direct Investment (FDI), Private Sector External Debt (PSED) and Portfolio
lnvestment (Pl)

AD banks along with their OBUs and respective client enterprises having FDI (inward, outward), PSED
(short, medium and long term) and Pl are hereby advised to strictly comply with the following
instructions to ensure duly and timely submission of periodic returns on foreign investment/external
loans to Statistics Department, Bangladesh Bank.

The enterprises and ADs/OBUs shall have to comply with the following instructions

All private sector enterprises having FDI (lnward/Outward) and PSED (Medium & Long Term) shall
have to obtain certificate (one time only) from the Statistics Department, Bangladesh Bank
regarding submission of FDI and PSED (Medium & Long Term) Returns to Bangladesh Bank.
However, submission of FDI and PSED (Medium & Long Term) Returns in accordance with the above
mentioned Forms (Fl-1., Fl-2, ED-1, ED- 2, as the case may be) to the Bangladesh Bank for the first
time, shall be considered as request for obtaining such certificate and hence separate request shall
not be required.
All AD banks and OBUs shall have to submit/upload (as the case may be) the aforesaid returns of
their own as well as those received from their respective client enterprises regularly in due course as
stated above to Statistics Department/ EDW of Bangladesh Bank with forwarding letter mentioning
the name of the concerned FDI/PSED receiving entities whose forms are being submitted.
iii. For receiving FDI (lnward/Outward) and PSED (Medium/Long Term) through different bank
branches of the same bank or different banks, the enterprise concerned shall have to submit such
returns through one nominated bank branch only.
iv iv. Enterprises of EPZs/EZs(Type A, B or C) having FDI/PSED are also required to submit FDI and PSED
Returns as mentioned above through their nominated ADs/OBUs

v. Head Offices/Principal Offices of all AD banks shall have to submit the branch/OBU-wise updated
list of enterprises having PSED (Medium & Long Term) and FDI (both FDI in Bangladesh &
Bangladeshi lnvestment Abroad) as per the format (Appendix 57, Appendix 58 & Appendix 59) of

471 |i:'arr:
 Corporate Laws and Practices

their client enterprises regularly on quarterly basis to Statistics Department of Bangladesh Bank,
Head Office by the 10th day following each quarter.

vi. Head Offices/Principal Offices of all AD banks shall have to submit updated list of Non-resident
lnvestors having NITA as per the format (Appendix 60) on monthly basis to Statistics Department of
Bangladesh Bank, Head Office by the 7th day following each month.

vii. Reporting enterprises must ensure that the quarterly returns submitted by them especially in Forms
Fl-1 & Fl-2 are accompanied by supporting financial statement/accounts (audited or unaudited) for
the reference quarter. ln the case of any significant changes which might take place later in audited
accounts must be brought to the notice of this department in order to revise the existing database
accordingly.

viii. viii. For submission of return of PSED (Medium & Long Term) in prescribed forms (ED-1 & ED-21, a
copy of the repayment schedule, approved borrowing agreement and subsequent amendments
thereon (if any) shall have to be submitted also.
ix. While providing any service to enterprise having FDI (lnward and outward) /PSED, the bank/OBU
shall ensure that the service receiving enterprise has duly submitted FDI/PSED Returns to
Bangladesh Bank.

26.Submission of information regarding transactions in foreign exchange market through 'Online Foreign
Exchange Market Monitoring System'

A web-based platform titled "Online Foreign Exchange Market Monitoring System" has been developed
for submission of 'foreign exchange market related statements through online. ADs are required to
submit the following 7(seven) statements in different intervals through the above mentioned oniine
web portal of Bangladesh Bank:

SI No Name of the Statement Frequerrcy

1. Daily Statement of lnter-Bank and Cross Border Foreign Exchange
Tra nsactions
2 Daily Statement of Foreign Exchange Rates Daily
3 Daily Statement of Deal Rates with Exchange Houses
4 Daily Statement of Quoted Rates to Exchange Houses
5 Daily Statement of Day end Balances in Nostro Accounts
6 Monthly Statement of Unadjusted Entries of Nostro Accounts Monthly
7 Monthly Foreign Exchange lnflow-Outflow Statement

The short description of submitting the above mentioned statements are given below:

1. Daily Statement of lnter-Bank and Cross Border Foreign Exchange Transactions: ADs shall
submit the information regarding buying and selling of foreign exchange (spot, forward, swap)
with all correspondent banks and OBUs located in Bangladesh or outside on daily basis through
designated web portal.

2. Daily Statement of Foreign Exchange Rates: The following foreign exchange rates mentioned in
exchange rate sheet of banks are to be submitted within 11.00 a.m. of each working day:

4721?a*.t
 Corporate Laws and Practices

(i) Buying rates for Cash, TT Clean, OD Sight, OD Transfer, 1m forward, 3m forward, 6m forward,
1yr forward, 1m usance export bill, 3m usance export bill, 6m usance export bill, 1yr usance
export bill, export bill collection.

(ii) Selling rates for Cash, BC, TT & OD, 1m forward,3m forward,6m forward,lyr forward

This is to mention here that bank shall have to submit above.mentioned daily exchange rates (if
any) of those currencies which it usually publishes in its daily exchange rate sheet. lf any
exchange rate of any bank changes after submitting it in web portal, bank will have to submit
the changed rate to the web portal immediately.

Banks have to submit interbank buying and selling rate of US Dollar in the same portal (Two way
Quotations for lnter-bank Foreign Exchange Transactions).

3. Daily Statement of Deal Rates with Exchange Houses: Authorized Dealers buy foreign exchange
from Exchange Houses. Currency-wise maximum and minimum exchange rates of foreign
exchange bought from exchange houses of any working day have to be submitted through
designated web portal within L1.00 a.m. of the next working day. To mention, only maximum
and minimum rates are to be quoted regardless of number of transactions.

4. Daily Statement of Quoted Rate to Exchange Houses: Authorized Dealers quote different
exchange rates to buy foreign exchange from Exchange Houses. Quoted exchange rate for
buying foreign exchange has to be submitted immediately through online web portal. To
mention, only currency-wise maximum and minimum rates are to be reported. For example,
first quoted rate of a currency will be considered as maximum and minimum rate of that
currency simultaneously. Any subsequent change in this rate will be reported as maximum or
minimum (as the case may be) exchange rate of this currency.

5. Daily Statement of Day-End Balances in Nostro Accounts: lnformation regarding balances held
in different nostro accounts (account-wise deposits, placements, investments, etc.) at the end of
each working day will have to be submitted by 2.00 p.m. of the subsequent working day to the
designated web portal. This is to mention here that information regarding balances held in one
or more than one OBUs will also have to be reported.

5. Monthly Statement of Unadjusted Entries of Nostro Accounts: After each month, AD bank shall
have to report information regarding number and volume of unreconciled entries of nostro
accounts (as per both local and foreign book) and reconciliation of unreconciled entries of
respective nostro accounts through designated web portal within 7th instant of the next month.

7. Monthly Foreign Exchange lnflow-Outflow Statement: Actual of previous month and projected
of next month information of inflows and outflows of foreign exchange shall have to be
submitted on monthly basis in designated format through the web portal within L0th instant of
each month. Detail description/instructions for submitting above statements have been given in
'User Guidelines'attached with the web portal.

473 1i':ig*
 Corporate Laws and Practices

27. Monthly Statement of lnward and Outward Remittances

(1) Monthly Statement of lnward Remittance

Based on the input made to the 'Online lnward Remittance Monitoring System (Para 10, Chapter 5, Vol-
1), Head Offices/Principal Offices of all ADs are advised to submit "Monthly Statement of lnward
Remittance" (Appendix 61) to the FEOD, Bangladesh Bank, Head Office by 10th instant of each month.

(2) Monthly Statement of Outward Remittance

Based on the input made to the Online TM Form Monitoring System (Para 2, Chapter 5, Vol-1), Head
Offices/Principal Offices of all ADs are advised to submit "Monthly Statement of Outward Remittance"
(Appendix 62) to the FEOD, Bangladesh Bank, Head Office by 10th instant of each month.

Summory ond Self-test

1. ln which cases import through LCs is allowed on deferred payment/usance basis?

2. What exports are exempted from repatriation of export proceeds?

3. Mr. NYZ is a Singaporean citizen is planning to do share business in Bangladesh. He is not aware
about procedure of doing share business in Bangladesh in light with foreign exchange regulation.
Please provide him a rigorous guidelines about issue of listed companies share in favor of Non-
resident and remittance of sale proceeds of share etc.

4. ABC Bangladesh Limited is subsidiary of ABC UK Limited and ABC UK Limited is providing :en'
, ofl
Strategic decision making, administrative, strategic procurement, lT etc. to ABC Banglades; ,rnited.
ABC Bangladesh Limited in return ls planning to pay management for this services. Please clarify
whether ABC Bangladesh Limited can pay monthly Management fees to ABC UK Limited? lf yes what
documents will be required from ABC Limited UK and what process has to be followed by ABC
Bangladesh Limited for making payment to UK? Any other point (under local laws) which should be
considered at the time of making payment?

5. One of your client ("PQR"), in the fashion business, has some third party manufacturers in
Bangladesh to whom they outsourced the production; the current structure is:

o The Bangladesh manufacturers directly sell the products directly to Paris;

o The Bangladesh manufacturers pay a commission fee to a Hong Kong subsidiary ("HKPQR")
of PQR, since HKPQR performs some quality services on the products manufactured by the
Bangladesh manufacturers.

The client told us that for some local Bangladesh issues (l guess maybe related to some local
constraints about the payment flows outside Bangladesh, such as block of capitals or similar rules),
the Bangladesh manufacturers can't no longer pay the commission fees to HKPQR.

ls there any ways to pay off the services fees without any hassle?

474l{' :.t g c
 Corporate Laws and Practices

6. Ms. Nowrin Zaman Zaara is a UK national but is residing in Australia. He intends to invest in
securities listed at Dhaka Stock Exchange. ln the context of the provisions of Foreign Exchange
Regulations, advise him in respect of the procedure to be followed for purchase and sale of shares of
companies listed in Bangladesh.

7. NZZ Bangladesh is a Type A EPZ Company and a branch of NZZ Group Holding (a company registered
in Germany) and is engaged in the Garments export business. lt requires working capital finance to
support its operations and intends to borrow funds from its head office i.e. NZZ Group Holding on a
repatriable basis. You are required to briefly explain the conditions which NZZ Bangladesh would
have to comply with under the Foreign Exchange Regulations of the Central Bank of Bangladesh.

8. ln view of large decline in the value of shares in Asian markets, a group of US investors believe that
now is the opportune time to invest in such markets as they have almost reached their lowest limits.
One such investor, Mr. Zaman is interested in buying securities listed on Dhaka Stock Exchange. With
reference to relevant provisions of Foreign Exchange Manual, you are required to advise Mr. Zaman
on the following:

(i) Procedure to be followed in order to trade in listed shares in Bangladesh.

(ii) Whether Mr. Zaman would be entitled to receive dividends on such securities and are there any
restrictions on repatriation of funds outside Bangladesh?

9. Explain the meaning of "a person resident outside Bangladesh" as referred to in the Foreign
Exchange Regulations.

10. Explain the term "Foreign Controlled Company" as referred to in the Foreign Exchange Regulations
(06 M)

475iirrig*
 Corporate Laws and Practices

Answers to Self-test

1. Subject to compliance with other conditions laid down in this chapter and in the current lPO, import
is allowed on deferred payment/usance basis in the following cases:

(i) lmport of capital machinery and spares for own use by industrial importers on up to 360 (three
hundred sixty) days usance basis;

(ii) lndustrial raw material imports for own use of industrial importers (including back to back
imports discussed in detail in the next Section) on up to L80(one hundred eighty) days usance
basis;

(iii) lmport of coastal vessels including oil tankers and ocean going vessels including those procured
for scrapping on up to 360 (three hundred sixty) days usance basis;
(iv) lmport of agricultural implements and chemical fertilizers on up to 180 (one hundred eighty)
days usance basis;

(v) lmport of life saving drugs (certified/declared as such by Drugs Administration Authority) on up
to 90 (ninety) days usance basis.
(vi) HR Coil, scrap, pig iron & sponge iron used for manufacturing of flat steel and long steel under
steel industries for being used in own factories on up to 360 (three hundred sixty) days usance
basis.

For such deferred payment imports, the prices must be internationally competitive and usance
interest, if any, may bear mark-ups over LIBOR according to the prevailing market conditions subject
to overall cost not exceeding 6(six) percent per annum for the relative period.

2. The prohibition mentioned above does not apply to the export of:

i. bonafide trade samples sent by registered exporter up to the value prescribed in the Export
Policy in force;

ii. personal effects, whether accompanied or unaccompanied, of travellers;

iii. ships stores and transhipment cargo;

iv. goods shipped under the order of the Government of Bangladesh or of such officers as may be
appointed by the Government in this behalf or of the Military, Naval or Air Force authorities in
Bangladesh for Military, Naval or Air Force requirements.

ln the case of export by Post, a certificate signed by a Gazetted officer or by any person entitled to
use service postage stamp should be pasted on the outer cover of the parcel to the above effecU

v. gift packets where they are accompanied by a declaration by the sender that the contents of
the packet are less than the value as prescribed in the Export Policy in force and that the
dispatch of the packet does not involve any transaction in foreign exchange; and

vi. where the packet is covered by a certificate issued by the Bangladesh Bank to the effect that
the export of the parcel does not involve any transaction in foreign exchange.
Exemptions as above will be allowed by the Customs Authorities after being satisfied that the
relative exports qualify for such exemptions

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 Corporate Laws and Practices

3. lssue of shares in favor of non-residents

A. Prior permission of the Bangladesh Bank is not required for issue of shares in favor of non-
residents against foreign investment in Bangladesh; general permission is accorded in this behalf
subject to the following conditions:

(a) The industrial venture will have permission from the Registrar of the Joint Stock Companies and
Firms (RJSCF)/The Bangladesh Securities and Exchange Commission (BSEC) about its capital
issue.

(b) Shares may be issued either against freely convertible foreign exchange brought in from abroad
through the banking channel or against import of capital machinery. Payment against such
import must be made from abroad. However, foreign exchange thus brought in must be
encashed in taka before issuance of shares except in the cases of Type A & Type B units of EPZs
& EZs wherein equity in FC brought from abroad may be retained in FC accounts of the units
concerned. ln the case of issuance of shares against capital machinery, the machinery have to be
cleared from the Bangladesh Customs first.

Beside, shares may be issued in favor of non-residents by debit to non-resident Taka accounts
maintained by ADs in the names of their overseas branches and correspondents against inward
remittance in convertible currencies. Hence ADs may issue certificate in support of payment from
such account for purchase of shares in Bangladeshi companies. ln the context of certificate issuance
to the beneficiary, ADs shall follow the format in Appendix 5/39 in case of payment from non-
resident Taka account and the format in Appendix 5l4O in case of payment against inward
remittance in foreign currency.

(c) Foreign Exchange lnvestment Department, Bangladesh Bank, Head Office must be informed
through the concerned AD about the issue of shares to non-residents pursuant to (a) &

(b) above with mentioning'Reporting Transaction lD'to the'Online Foreign Exchange Transaction
Monitoring System' of Bangladesh Bank, within 1-4 (fourteen) days of such issue, along with the
followi ng documents/papers:

(i) attested copy of the permission for the capital issue accorded by the RJSCF/BSEC;

(ii) attested copy of the registration, if any, of the foreign investment in the industrial ventures
accorded by the BIDA/BEPZA/BEZA;

(iii) copy of encashment certificate of foreign exchange in Taka authenticated by the AD in case
of issue of shares against foreign exchange received from abroad through the banking
channel or from non-resident Taka accounts (Appendix 5/39 or 5/40 as the case may be);
and

(iv) for issue of shares against foreign investment in the form of capital machinery, the
authenticated copy of bill of entry evidencing clearance of the capital machinery from the
Custom Authorities, copies of the related import permit, invoice, bill of lading/air way bill,
etc.

477 lI' a ,6;

 Corporate Lsws and Practices

B. Transfer of Bangladeshi Shares/Securities

Transfer of Bangladeshi shares and securities from one shareholder to another irrespective of their
nationality/residency would not require Bangladesh Bank approval. No intimation to Bangladesh
Bank is required in case the transfer is effected between residents. However, for the transfer of
shares of private/public limited companies not listed in the stock exchanges, from resident to non-
resident, non-resident to resident and non-resident to non-resident, FEID, Bangladesh Bank, Head
Office should be informed, through the concerned AD within 14(fourteen) days, of such transfer
along with the following documents:

a) copy of encashment certificate, authenticated by the concerned AD, of foreign exchange in Taka
credited to the account of transferor in case of transfer of shares from resident to non-residenU

b) attested copy of the permission for the transfer accorded by the RJSCF/BSEC;

c) attested copy of up-to-date Schedule-X.

C. Temporary Non-resident Taka Account (NRTA)for Foreign lnvestors

ADs may open NRTA in the name of the proposed company/enterprise of foreign investors
contemplating to invest in Bangladesh without prior approval of Bangladesh Bank. Such accounts
may be credited with inward remittances received from abroad only. Upon
registration/commencement of the business, a new account in the name of the company may be
opened following usual procedure. However account opened previously should be closed
immediately and balances lying therein shall be transferred to the new account. lf, for any reason,
the proposed investment/incorporation does not take place, the balance of the account after
meeting the required expenses, may be allowed to be repatriated without prior approval from
Bangladesh Bank. However, ADs shall report opening and closure of such accounts to FEID and
FEOD, Head office/concerned office of Bangladesh Bank immediately along with attested copy of
form 'c'/TM form (as the cases may be) with particulars of transactions.

3. Remittance of sales proceeds of non-residents' investment (direct/portfolio) in Bangladesh

Guidelines for effecting remittance of sales proceeds of non-residents' investment in Bangladesh are
as under:

(A). Shares of the public limited companies listed with stock exchange(s)

prior approval of Bangladesh Bank is not necessary for remitting the sales proceeds of securities held
by non-residents. ln such cases, repatriable amount must not exceed the market price of securities
prevailing in the stock exchange on the date of sales.

4. Bangladesh is an extreme foreign exchange controlled regime. Appropriate permission has to be

sought from Bangladesh lnvestment and Development Authority (BIDA) and/or Bangladesh Bank (i.e.
the central bank of Bangladesh) prior to make outward remittance,

There are no specific guidelines for making payment of management fees to foreign related party.
However, according to Foreign Exchange Guidelines (Volume-1) an entity can make remittances for
the payment of-

478 llu;tg*
 Corporate Laws und Practices

o Royalty
o Technical Knowhow
o Operational service fees
o Marketing commission etc.

As per section 25 of chapter 10 of Guidelines for Foreign Exchange Transactions Volume 1:

"No prior permission of the Bangladesh Bank or BIDA Is required by the enterprises for entering into
agreement involving remittance of royalty, technicaI knowhow or technical assistance fees,
operational services fees, marketing commission etc. if the total fees and other expenses connected
with technology transfer do not exceed the following limits:

a) For new projects, not exceeding 6% of the cost of imported machineries;

b) For ongoing concerns, not exceeding 6% of the previous years' sales as declared in the
income tax returns.

The Authorized Dealers (ADs, i.e. the bank through which remittance of royalty would be made) may
remit such royalty and other fees without prior approval of the Bangladesh Bank. ADs may remit
such fees at rates exceeding the above limits without prior approval of Bangladesh Bank, provided
specific approval of BIDA has been obtained for the higher rates by the applicant company."

However, as per recent FE Circular No 42 issued by Bangladesh Bank on 29 November 2017, the
above provisions of the GFET has been repealed and hence the restrictions for remittance of royalty
at maximum 6% of previous years' sales no longer exist in the GFET . However, the new regulation
requires approved private sector industrial enterprises to obtain approval for remittance of royalty,
technical fees and others according to the prescribed procedures of BIDA.

Hence, the prior permission from Bangladesh Bank and BIDA is not required up to 6% of the previous
year's sales as declared in income tax return (or for new projects 6% of imported machineries in that
year). ln order to remit the amount exceeding 6% as above, a prior approval from BIDA is required
before entering into agreement to make such payments.

As per Guidelines for Foreign Exchange Transactions, Management Fees are not explicitly given
scope for remittance abroad, and also from our experience such transactions were not allowed by
Bangladesh Bank. Hence, we believe remittance of Management Fees at net cost plus 7.5% will not
be given approval by Bangladesh Bank and the Bangladesh entity will not be able to make such
payments.

Documents needed from ABC UK Limited for making remittances of royalty, technical knowhow or
technical assistance fees, operational services fees, marketing commission etc. to foreign entity-

. Agreement between ABC UK Limited & ABC Bangladesh Limited.

o ABC Bangladesh Limited also need to specify, if ABC Bangladesh Limited were to take similar
services from any unrelated enterprise what would have the cost for ABC Bangladesh
Limited then.

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 Corporate Laws and Practices

a Every attempt should be made to charge fairly for the service provided, any charging has to
be supported by an identifiable and reasonably foreseeable benefit along with robust
evidence.

For making royalty, technical knowhow or technical assistance fees, operational services fees,
marketing commission etc. (outward remittance) ABC Bangladesh Limited has to follow the
following process-

a Provide AD (Authorized Dealer) with certificate of incorporation, memorandum of

association and similar type of documents.
a Apply for making remittance of royalty, technical knowhow or technical assistance fees,
operational services fees, marketing commission etc. in the prescribed form along with the
relevant contract duly registered with BIDA. All relevant documents are to be submitted
with the triplicate also.
a ABC Bangladesh Limited need to provide an undertaking in the triplicate that if any
discrepancy found in the remittance made it will make an arrangement to repatriate the
amount remitted in excess of the actual remittance.
a All the information provide in the application form need to be verified by the auditors of the
company and the correctness of the information to be certified by the auditors in the space
provided in the form.
a An additional statement need to be certified by the auditors showing the basis and actual
calculation of the net royalty and technical fees.

5. Bangladesh is extremely FX controlled country. Any payments relating to service fees (commissions,
charges, fees or so, whatever name it is) to non-resident outside Bangladesh needs permission from
the Central Bank (i.e. Bangladesh Bank). Having said this, if Bangladesh manufacturer generates saies
from exporting goods to Paris, then it must keep t5% of export earnings as USD in its ERQ [export
retention quota) account from which Bangladesh manufacturer can remit the commission after
deduction of relevant withholding taxes, and no permission is required to use ERQ account as ERQ is
used to meet foreign obligation.

6. Trading of Quoted Shares by Non-Residents

Ms. Nowrin Zaman Zaara would be required to open "Non-resident lnvestor's Taka Account
(NITA)" with any Authorized Dealer in Bangladesh.

il He may remit funds from abroad into the special account or by transfer from a foreign
currency account maintained by him in Bangladesh.

ill Payment for such purchase of shares may be debited to the account on production of stock
broker's memo showing sale of shares to the account holder.
IV Disinvestment proceeds may be credited provided evidence of the sale price in the shape of
stock broker's memo is produced.
The fund available in such special account can be transferred outside Bangladesh or credited
to a foreign currency account maintained in Bangladesh at any time without prior approval
ofthe Central Bank.
vi Dividend income can also be credited to the above accounts.

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 Corporate Laws and Practices

7. (A) 100 (hundred) percent foreign owned enterprises in the EPZs known as Type A industries may
obtain short term foreign currency loans from overseas banks and financial institutions subject to
the following conditions:

(i) The loan shall be received through an AD in Bangladesh; and the loan proceeds will be
credited to the FC account maintained by the AD in the name of the Type A unit, to be used
for financing import of capital machinery and raw materials, payment of interest/service
charges, repayment of loans and for crediting Taka account for meeting local expenses;

(ii) Only assets fully owned by the Type A industry may be lodged as collaterals for such loans;

(iii) Repayment of principal and interest on the loan shall be remitted out of the balances
available in the FC account without prior Bangladesh Bank approval. No fund may be
provided from the AD's own resources for such repayment except with prior approval of
Bangladesh Bank;

(iv) ln case the loan is called up by the creditor, the assets charged to foreign lender will be
allowed to be sold only in foreign exchange and proceeds, after paying off all local liabilities
in Bangladesh, may be remitted abroad with Bangladesh Bank's approval;

(v) No Taka loan against repatriable short term foreign currency loan will be allowed to a Type
A industry.

8. (i) Mr. Zaman will be required to open a "Non-resident lnvestor's Taka Account (NITA)" with any
authorized dealer.
o Such account can be fed by:

- Remittances from abroad

- Transfer from a foreign currency account maintained in Bangladesh by Mr. Zaman.

o Mr. Zaman shall be allowed to trade freely in any shares quoted on any Stock Exchange in
Bangladesh from this account.

' Payment from such purchases may be debited to the account on production of stock
broker's memo.
o Disinvestment proceeds may be credited to the account on provision of stock broker's
memo.
o Transfers from one such account to another may also be made in case of transfer of shares
between the two account holders.

(ii) Yes, Mr. Zaman is entitled to receive dividends which shall also be credited into special
convertible Taka account. There are no restrictions on repatriation of funds outside Bangladesh
and the funds available in such special accounts can be transferred outside Bangladesh or
credited to a Foreign Currency Account maintained in Bangladesh at any time without prior
approval of the Central Bank of Bangladesh.

9. "A person resident outside Bangladesh" includes a foreign national for the time being resident in
Bangladesh

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 Corporate Laws and Pructices

L0. "Foreign Controlled Company" is any company, not being a banking company, which is controlled,
whether directly or indirectly, by person's resident outside Bangladesh.

A company ltirm / branch or office of a company or firm, is deemed to be controlled directly or

indirectly by persons resident outside Bangladesh, if:

(a) if it is a branch office of a company incorporated outside Bangladesh;

(b) in the case of partnership, if
(i) 50 (fifty) percent or more of the capital of the partnership is owned by foreign nationals or,
(ii) the majority of the partners are foreign nationals; and
(c) in case of companies incorporated in Bangladesh, if
(i) so(fiftV) percent of the shares or more are owned by foreign nationals or,

(ii)sO(fifty) percent or more of the directors in the Board of company are foreign nationals. ln
the case of equal share holding or equal representation on the Board of Directors, a
company is deemed to be foreign controlled if its Chairman is a foreign national,

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Chapter 6

The lnsurance Act, 2OL0

Contents

lntroduction
Examination context

Topic List

1. Preliminary on lnsurance Act, 2010

2. Classification of lnsurance business

3. Registration of lnsurance business

4. Determination of premium for life and non-life lnsurance business

5. Accounts, Audit, Actuary report and Statements

6. Solvency Margin, Loan and Management of lnsurance business

7. lnvestigation and lnspection of information

8. Transfer of the title of policy and nomination

9. Commission, Rebate and Management cost

Summary and Self-test

Answers to Self-test

Answers to lnteractive questions

483 1F]*g*
 Corporate Lsh)s and Pructices

lntroduction

Learning objectives Tick off

Practica I significance

Practically whenever people want to start insurance business whether life insurance or non-life
insurance, they need to know the formation procedures as per regulatory requirements. The lnsurance
Act, 2010 will help to inspect and supervise lnsurance companies regularly and ensure the system
running properly. The provisions of lnsurance Act, 2010 shall be useful to start and run a company
complying with the rules and regulations of the Govt.

Stop and think

What things can you think of that are essential for the formation and running of an lnsurance Company?
Have you stopped to think about how this affects the operations of an lnsurance Company whether life
insurance or non-life insurance?

Working context

You might need to understand the implications of the requirement of lnsurance Companies Act to carry
out business or auditing work.

Syllabus links

Examination context

Exam requirements

lnsurance Act is an important part of the syllabus. Typically, ten percent of the questions come from the
part of lnsurance Act. Understanding the basic precepts relating to this act is vital. Other than lnsurance
'Act, you may also expect questions from general concepts of insurance, reinsurance and double
i nsu ra nce.

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 Corporute Laws und Practices

You are likely to be presented with scenarios and may have to conclude whether the formation of
lnsurance companies is valid, business of lnsurance company whether life or non-life insurance company
is in compliance with law, appointment and removal of directors and chief executive officer has done
properly, Commission, rebate and management costs are in accordance with the provision of this Act.
Candidates should be able to demonstrate their knowledge of the main provisions of the lnsurance Act,
2010.

1. Preliminary on lnsurance Act, 2010

This Act may be called the lnsurance Act, 2010.lt shall come into force immediately. An act to repeal
lnsurance Act, 1938 & to re-enact and consolidated the laws relating to the business of insurance. lt
provides the provisions applicable to insurer, insured, punishment for violation of the law. On the other
hand, it provides provision for lslamic lnsurance also.

1.1 Definitions (Section-2)

1) "Approved Auditor" means the auditor appointed by the authority according to the provisions of
this Act.;

2) "Approved lnvestments" means such investments as the Government may, by notification in the
official Gazette, specify as approved investments for the purposes of this AcU

3) "Approved securities" means Government securities, and any other security charged on the
revenues of the Government, or guaranteed fully as regards principal and interest by the
GovernmenU and any debenture or other security for money issued under the authority of any
Act of Parliament and specified as an approved security for the purposes of this Act fixed by the
Government by notification in the official Gazette;

4) "Participatory policy" means the contract by which the insurance policy holder attains the right
to get interest of the insurer of life insurance or the right of participation to the extra distribution
but the benefit given under the policy, if it is not determined according to the conditions of the
contract & the optional power of the policy holder is not applicable for that, then such benefit
will not include with interest or extra distribution identified this clause except the contract of
investment relating to the life insurance & the contract relating to the health, or the collective
life insurance contract or the health contract.

5) "Financial lnstitution" means the financial institution as defined under section 2(b) of the
Financial lnstitution Act, 1993;

6) "Electronic media" means any electronic media used for telecasting or airing including the
internet, mobile, radio- tele-vision tape recorder, cassettes, computer disk & CD ROM etc.;

7l "lslami insurance business" means the insurance business carried on according to the lslamic
Shariah;

8) "Actuary" means an actuary is possessing such qualification as may be prescribed;

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 Corporate Laws and Prsctices

9) "Employer of agents" means a person certified under this A who procures insurance business for
a life insurer whether or wholly or in part by employing or causing to be employed insurance
agents on behalf of the insurer;

10) "Authority" means the insurance controlling authority constituted under the lnsurance
Development & Control Authority Act, 2010;

L1) "Company" means the Company defined according to section. 2(1) of the Companies Act, 1994;

12) "Companies Act" means the Companies Act, 1994 (Act No, XVlll of 1994);

13) "Continuous incapable contract" means such contract by which on happening of the following
incident, benefit shall be give, such: -
a) if the life insured person dies for the reason mentioned to the insurance contract;
b) if the insured person become injured of incapable for illness or accident;
c) if the insured person becomes sick & takes treatment for that disease mentioned in the
insurance contracU

14) "Schedule" means the schedule of this AcU

15) "scheduled Bank" means the scheduled bank defined under section 2, clause U) of the
Bangladesh Bank Order 1972 (P. O. 127 of 1972);

16) "Liability" means the mortgage, fixed or floating charge hypothecation, pledge, giving title or
ballment or any other transfer of the immovable or movable property by which ownership
reduces either legally or beneficially;

17) "Registration" means the registration under section 9 of this AcU

L8) "Family" means husband or wife, father, mother, son, daughter, brother & sister & includes
every person depend on the concern people;

19) "Policy" means the insurance contrac!

20) "Re-insurance" means such contract by which the insurer limits his liabilities by transferring
extra risk of his insurance to One or more insurer or re-insurer;

21) "Restoration insurance" means such contract by which the re-insurer restores few liabilities to
the other insurer;

22) "Certified" in relation to any copy or translation of a document required to be furnished by or

on behalf of an insurer or a provident society as defined in chapter l-11 means certified by a
principal officer of such insurer or provident society to be a true copy or a correct translation, as
the case may be;

23) "Provision" means the provisions of this AcU

24) "Rules" means rules of this AcU

486 1{*.ag*
 Corporate Laws and Practices

25) "lnsurer" means any individual or corporate body of individuals or body corporate incorporated
under the law of any country or state outside Bangladesh which-
L) carries on insurance business in Bangladesh;
2) for the purpose of insurance business, employs a representative or maintain a place of
business in Bangladesh;

26) "lnsurance policy holder or policy holder" includes a person to whom the policy is issued, in
case of life insurance, a person to when to whole interest of the policy is vested forever;

27) "Liabilities of the insurance policy-holder" means-

a) the liabilities arising out from policy; or
b) the liability arising out of happening the incident prescribed in the policy concerning the life
insurance;

28) "lnsurance" means the policy & contract or the business on the condition of taking premium
anybody promises to give money on happening of any incident mentioned in the contract to the
injured for such happening. lnsurance also include contract of life insurance, re-insurance,
restoration insura nce;

29) "lnsurance agent" means any person licensed under this Act to continue, to renew & collect the
insurance policy, by taking or agreeing to take the commission or any other wages;

30) "lnsurance surveyor" means a person certified under this Act who gives opinion impartially by
examining the goods, properly or any interests issued under a policy of general insurance to
ascertain the cause, extent & location of any loss & to determine the amount of such loss & the
amount which is payable to the issued by the insurer or insurers or any person liable in respect
of such loss;

31) "Manager" means a manager defined under clause (p) of section 2(1) of the Companies Act,
1994;

32) "Person" includes any person. any institution, any company, any partnership business, firm or
any other institutions;

33) "Broker" means any person licensed under this Act, who is the mediator between any bank &
other financial institutions or insurance mediator, who with object of getting commission or fee
from the insurer or re-insurer and works on behalf of the offeror of insurer or re-insurer;

34) "Managing Agent" means a person. firm or company entitled to the management of the whole
affairs of any company, virtue of an agreement with the company. and under control &
directions of the directors except to the extent, if any. Otherwise provided for in the agreement
and includes any person, firm or company occupying such position by whatever name called;

35) "Government Securities" means the Government Securities defined under clause (a) of section
2(a) of the Securities Act, 1920 (Act No. X of 1920);

36) "Co-operative Societies Act" means the Co-operative Societies Act, 2001 (Act No 47 of 2001);

37) "Solvency Margin" means the fixed reserve asset determined according to provisions by the
insurer;

487 1!]agi:
 Corporate Laws and Practices

38) "Subsidiary or Subsidiary Company" means the subsidiary company defined under section 2(2)
of the Companies Act,1994;

39) "Auditor" means any person qualified to perform the duties of an Auditor as determined under
section 2!2 of the Companies Act, 1994;

40) The word or expression which has not been defined in this Act shall contain the same meaning
as used under the Companies Act, 1994

2. Classification of lnsurance business

As per Section 5 of the lnsurance Act, 2010 insurance business could be explained

(1) For the purpose of this Act there shall be two types of insurance business named as life
insurance & non-life insurance.

(2) Under this section life insurance means the insurance contract relating to human life which can
be, by rules, classified in various sub-class according to the provisions of sub-section (a) & (5).

(3) Under this section non-life insurance means all classes of insurance contract other than the
human life insurance contract which for carrying on the non-life insurance business effectively,
by rules, can be classified in various sub-class according to the provisions of sub-section (4) &
(s).

(4) lf the main purpose of any contract under this Act is to carry on the life insurance business &
there is any subject regarding the non-life insurance & any other insurance business in that
contract, then it would be deemed that the contract executed to carry on the life insurance
business.

(5) lf any contract is executed for the period of not more than one year having the conditions or
terms to compensate the accidental death or accident not causing death or sufferer for disease
or any disability & that contract has been made by the insurer registered as to carry on the non-
life insurance business, that contract shall be termed as non-life insurance business.

(6) Notwithstanding anything contained in this section, any insurer runs his life and general
insurance business under lnsurance Act, 1938 and lnsurance Corporation Act, 1973 shall be
deemed as life insurance and non-life insurance for the purpose of this Act.

3. Registration of lnsurance business

3.1 Registration of lnsurance company (section-8)

1) No person shall begin to carry on any class of insurance in Bangladesh, unless he has obtained a
certificate of registration for the particular class of insurance business from the insurance
Controlling Authority. However, the Jiban Bima Corporation and the Sadharan Bima Corporation
established under the lnsurance Corporation Act, 1973 shall be considered to be having been
registered under the Act for the Purpose of carrying on their business.

488 lilage
 Corporate Laws and Practices

2) Every person willing to carry on any life insurance or Non-life insurance business in Bangladesh
has to apply in the prescribed form and procedure to the Authority for obtaining a registration
certificate.

3) ln the case of an insurer incorporated under the lnsurance Act, 1938, who was carrying on any
class of insurance business in Bangladesh at the commencement of this Act, and is willing to
continue the same that insurer has to apply to the Authority in writing for obtaining a
registration certificate with in 6 (six) months from the commencement of this Act.

4) An applicant applying for registration under this section for thereof has to make payment of
prescribed fee.

5) Every application for registration shall be accompanied by the following papers, documents and
information

a) Where the applicant is a company, a certified copy of its memorandum and articles of
association, the name, address and occupation of its directors and their Tax ldentification
Numbers, if any.

b) Where the applicant is an insurance company incorporated under the lnsurance Act, 193g,
the full address of its Principal office in Bangladesh, the names and Tax identification
Numbers, if any of its directors and manager and their contact address.

c) ln the case of an insurer having its Principal place of business or domicile outside Bangladesh,
the documents specified in clause (a) of section 1,L4.

d) Where the applicant is a Co-operative society, the names, addresses and Tax ldentification
Numbers, if any, of its members and address of its principal office.

e) A statement of the class or classes of insurance business done or to be done and a statement
that the amount required to be deposited section 23 or by section i.19 before application
for registration is made, has been deposited together a certificate from the Bangladesh Bank
showing the amount so deposited.

f) Where the provisions of section 21, or section 118 apply, a statement duly certified by an
auditor showing the total paid up capital or the total working capital of the insurer and a
declaration verified by an affidavit made by the Principal Officer of the insurer authorized in
that behalf that provisions of those sections as to paid up capital or working capital as the
case may be has been complied with.

g) A certified copy of the published prospectus, if any, and the standard policy
forms of the
insurer and statement of premium rates, advantages, terms and conditions to be offered
in
connection with insurance policies together with a certificate in connection with life
insurance business by an actuary that such rates, advantages, terms and conditions
are
workable and sound.

h)The receipt showing payment in the prescribed manner of the fee as prescribed for any class
or sub class of insurance business under this Act.

489 1l)*y*
 Corporate Lsws snd Practices

i) Any other documents, paper or information as prescribed under this Act'

by the
6) Every application made under this section shall be accompanied by a declaration signed
applicant and verified by an affidavit stating that all statements as supplied with the application
are true and correct & true;

After getting the application under sub-section-3 of this section of this Act, the authority
shall
7)
make necessary inquiry and investigation regarding the documents/submitted with the
application to be clear the same.

3.2 Certificate of Registration certificate awarding (Section-9)

Subject to the provisions of sub-section (2) & (3), the authority may, after receiving
the
1)
application for registration under section 8, if they have satisfied with the following matter,
provide the registration certificate for commencing the life insurance or non-life insurance; such
AS:

(a) The applicant is registered under the laws of Bangladesh or any other states;

(b) The applicant has fulfilled the provisions regarding the minimum paid up share capital under
this AcU

(c) The applicant has fulfilled the provisions regarding minimum constituted deposit under this
AcU

(d) The characteristics of Management of the applicant is good & economical condition is

strong;

(e) The applicant has fulfilled the provisions of taking initiative regarding the re-insurer under
this AcU

(f) There is the possibility of having sufficient income for paying the debt liability arising out of
the applicant's Planned business;

(g) lf they have the circumstances to appoint an actuary and competent other officers & staffs
for continuing the life insurance business under the authority of the applicant;

2\ lf the application of the applicant is not considered as proper by the authority, the authority
may, by giving reasonable opportunity for hearing to the applicant, refuse the application in
proper way and proper time and inform the decision to the applicant mentioning the reason for
such decision in written'

3) The aggrieved person, for the refusal of the application under sub-section (2), may apply to the
authority for reconsideration within 30 days of knowing such refusal.

4) lf the applicant has not paid the fees which prescribed by the provisions of this Act for every
class or sub-class insurance business & if the receipt for the same has not been attached with
the application, then the authority shall refuse the application for registration certificate'

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 Corporate Laws and Practices

3.3 Withholding or cancellation of registration (Section-1O)

1) The Authority shall withhold or cancel the registration of any insurer either wholly or so far as it
relates to a particular class of insurance business as the case may be for one or more of the
following grounds.

lf the insurer:

a) fails to comply with the provisions of section 23 or section 119 as to deposits;

b) does not commence business within one year of its registration; by proposing to enter into
arrangement with its creditor has made such arrangement or has amalgamated his business
with the business of any other insurer or the insurer has gone into liquidation or is adjudged
an insolvent;

c) carries on any insurance business against the interest of the policy holders or against
development of business or one which is injurious for national interest;

d) becomes unable to discharge his duties and responsibilities;

e) fails to keep deposited the prescribe solvency margin under the provisions of this AcU
f) if the insurer makes default in complying with or acts in contravention of, any requirement
of this Act or any rule or order made there under;

g) if he is found engaged in any immoral or irregular activities in managing his business;

h) if any claim upon the insurer, arising in Bangladesh under any policy of insurance remains
unpaid for three months after final judgment in regular course of law.

2l The Authority shall withhold registration of an insurance company for a maximum period of
three months by giving thirty days' notice if the insurer is found to have not complied with one
or more of the activities mentioned under clause (l) above. Until the order of withholding is
withdrawn the insurer shall not enter into any new contract of insurance, but all rights and
liabilities in respect of contracts of insurance entered into by him before such withholding
takes effect, shall continue.

3) The authority may take the following initiatives after receiving the response of the notice sent
under sub-section (2) such as:

a) if the authority is satisfied by the reasons given by the insurer, then it may remove the stay
order as early as possible;
b) if the authority is not satisfied by such reasons given by the insurer. Then it may extend the
stay-order or further not more than 2 months or may cancel the registration.

4\ lf the authority decides to extend the period of stay-order according to sub-section 3(b), the
authority shall inform the following matter to the insurer, such as:
a) the period for the extension of stay-order; and
b) the reason for such extension & what initiative should be taken by the insurer for
terminating the reason & the limitation period for the same.

491 lili:gr:
 Corporute Laws snd Pructices

5) lf the authority is not satisfied for the initiatives taken by the insurer under sub-section 4(b), it
shall cancel the registration certificate as early as possible & if satisfied then remove the stay-
order.

6) lf any decision for the cancellationof the registration certificate has been taken, then the same
should be informed through written notice to insurer & such decision shall be effective from
the date mentioned in the notice.

7) The applicant may, against any system or decision made by the Authority under sections 9, L0,
1 1 make appeal to the government within 90 days from the informed day of such decision.

8) lf any registration certificate has been cancelled under this Act, the insurer may not make any
insurance contract from the date of the effectiveness of such Act:

Provided that, the cancellation of certificate before issued, the responsibility and liability of such
policy, subject to the sub-section (11), shall have the same effect that if the registration certificate
would have been cancelled.

9) lf the certificate is cancelled according to the provision of sub-section (1) of this section, the
authority may restore the certificate from the own consideration if they satisfy for the
followings:

lf the lnsurer-

a) deposit necessary amount according to sections 23 and'J.19;

b) restore his permanent contract;
c) maintain the obligations of which violation or non-performance the certificate has
cancelled according to clause (g) of sub-section (1) of this section;
d) has not remained unpaid any demand according to clause (j) of sub-section (1) of this
section; or
e) obeys all direction given by the Authority.

10) Where the certificate of an lnsurance Company has been cancelled, the Authority may apply
before the Court for the order of winding up of the lnsurance Company or any classes of
insurance business within six months from its effectiveness:

Provided that, the insurance certificate has not yet been restoring or applied for restore before
the Court according to sub-section 9 of this section.

11) The Court may proceed by taking the application under sub-section (10) of this section as the
application filed according to section-103 & 109.

3.4 Renewal of registration (Section 11)

1) A registration certificate issued under section 9 is renewable and shall be renewed annually for
each year.

2) An insurer shall submit an application for the renewal for any year to the Authority before the
30th day of November of the preceding year and shall be accompanies by evidence of payment
of prescribed fee for the renewal.

492 lPr:gr:
 Corporate Laws and Practices

3) The Authority, upon receipt of the application and the prescribed fee, shall renew the
registration and grant a certificate of renewal of registration.

4t The Authority shall maintain a register where all information regarding certificate of registration
and its renewal, withholding and cancellation be recorded.

3.5. Provision of restrictions for registering the same insurer for life and non-life insurance business
(Section-13)

No person shall be registered as an insurer:

a)for any life insurance business if he is registered for any class of non-life insurance business;
o!'
b)for any non-life insurance business if he is registered for any class of life insurance business.

3. 6 Licenses on establishment of branches (Section-14)

1) After the commencement of this Act no insurer shall establish any new branch or office or
continue business dealing unless & otherwise it has the license from the authority.

2l For getting proper license according to sub-section (L), the insurer shall submit application
accompanied with fees determined by the rules, all of which shall be made in the form
determined by the provisions.

3) After getting the application under this section the authority will consider the application &
issue the license to the insurer in the prescribed form.

4l lf the application of the applicant is not considered proper by the authority, the authority shall
not grant the application by giving proper chance to the insurer and authority shall inform
mentioning the reason for such refusalto the applicant within six weeks of such grant or refusal.

5) lf the application has not been granted under sub-section (4), the aggrieved person shall make
appeal to the government within 30 days & the order given by the government for such
application shall be deemed as final.

6) When such appeal to the government is pending, the insurer shall not establish branch or office,
continue business dealing or re-apply for license.

7) lf the application for license for establishing new branch or office or business dealing or the
appeal (where applicable) has been refused, the same insurer may not apply for license of
establishing new branch or office or business dealings in the same place before one year of such
refusa l.

493 lileg,;
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4. Determination of premium for life and non-life lnsurance business

4.1 Appropriateness of premiums in life insurance (Section-15)

1) lf when considering an application for registration under section 8 or at anytime it appears to

the authority that the premium rates, advantages, terms and conditions offered in connection
with life insurance is not adequate the authority may within the time specified order the
modification of such rates, advantages, terms and conditions as they think necessary.

2) No insurer can issue any life insurance policy if the premium rates, advantages, terms and
conditions laid in the policy of actuary employed by the insurer is not certified.

3) Any insurer who is holding a life insurance business wants to open a new insurance scheme then
he shall submit to the authority before which shall not less than 30 days along with certification
of actuary and according to the direction of the authority a prospectus containing full
description and sample of policy scheme.

4l lf any insurer fails to comply with the provisions of sub-section (2) and sub-section (3) then the
authority can impose fine for each failure a sum not more than five lac taka.

5) The certificate given by actuary shall be according to the regulation and in prescribed form.

6) The authority can prescribe highest interest rate used for premium rate and commission rate

7l lf it appears to the authority that the scheme of life insurance is not adequate then he shall
according to sub-section (3) take the following action within 30 days, such as-

(a) lt may forbid distrait among people the life insurance scheme from the insurer; or

(b) lt may order the insurer to change or amend the insurance scheme according to the
specified manner.

S) The authority may order insurer to provide the information regarding mortality table of
subscribers of insurance policy, investment rate of profit, rate of management expenditure and
commission rate and the insurer shall be bound by the order.

9) No insurer shall, if any prospectus has been submitted to the authority under clause (h) of
section 8 or it has been submitted or he shall offer any other contract of policy except the life
insurance policy of amended by specific prospectus made under section t2 and if the insurer
does not submit to the authority under this section the rates, advantages, terms and conditions
for policy.

10) ln every ten years, the authority may prepare a death index of policy holders.

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4.2 Determination of rate of prernium of non-life insurance business (Section-l7)

1) ln order to achieve the objectives of this law the Authority may form a Central Rating
Committee (C R C) and in consultation with this committee the Authority shall determine the
rate of premium for non-life insurance business which the insurers shall be bound to comply
with.

2) The Chairman of the Authority shall be the chairman of the central rating committee and the
number of its members, functions and its management shall be determined by the Act.

3) lf necessary, the government may dissolve the central rating committee at any time

lnteractive Question 7:

a) Enumerate the provisions of The lnsurance Act, 2010 relating to:

(i) determination of premium and

(ii) collection of premium.

5. Accounts, Audit, Actuary report and Statements

5.1Audit (Section-28)

1) The balance sheet, profit and loss account, and revenue account of every insurer in respect of
the insurance business transacted by him in Bangladesh shall, unless they are subject to audit
under the Companies Act, be audited annually by one or auditors in accordance with the
provisions of this Act.

2) An auditor employed under the provision of this section shall have authority to exercise such
powers and functions as is given to an auditor under section 2t3 of the Companies Act.

5.2 Special audit (Section-29)

1) Whatever may exist in other provisions of this law, the Authority may from time to time order
auditing of all insurance business related transactions, records, documents of any or all
insurance companies doing insurance business in Bangladesh under the provisions of this Act.
It may be mentioned here that an auditor appointed under this section shall not be the same
person appointed as auditors under section 28.

2) An auditor appointed under this section shall have a right of access to all such books of account,
registers, vouchers, correspondence and other documents of the insurer and shall be entitled to
require from the directors and officers of the insurer such information and explanation as may
be necessary for the performance of his functions and duties under this section.

3) An auditor appointed under this section shall prepare an audit report within a maximum period
of four months of its appointment and shall submit the audit report to the Authority in four
copies.

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4) An auditor appointed under this section shall be paid by the insurer such fee as may be
prescribed by the Authority.

5.3 Actuary report and briefings (section-30)

1) Every insurer carrying on life insurance business shall once at least in every one year cause an
investigation to be made by an actuary for valuation of his liabilities according to the prescribed
rules and regulation including the financial condition of the life insurance business and shall
cause an abstract of the report of such actuary to be made in accordance with the chart and
procedure prescribed in the provisions for investigation.

Provided that, subject to the special condition of the insurer the authority may at any date
within two years of completion of previous investigation give permission for investigation under
this section.

Z) The provisions of sub-section (1) regarding the making of an abstract shall apply whenever at
any other time an investigation into the financial condition of the insurer is made with a view to
the distribution of profits or an investigation is made of which the results are made public.

3) There shall be appended to every such abstract as is referred under this section a certificate
signed by the principal officer of the insurer that full and accurate particulars of every policy
under which there is a liability either actual or contingent have been furnished to the actuary for
the purpose of the investigation.

4) There shall be appended to every such abstract a statement in accordance with the regulations
of the life insurance business in force atthe date on which the accounts of the insurer are made
up for the purposes of such abstract:

Provided that, if the investigation, referred to in sub-sections (1)and (2)is made annualiy by any
insurer, the statement need not be appended every year but shall be appended at least once in
every three years.

5) Where an investigation regarding the financial condition of an insurer is made as at a date other
than the expiration of the year of account, the accounts for the period since the expiration of
the last year of account and the balance-sheet as at the date at which the investigation is made
shall be prepared and audited in the manner provided by this Act.

6) The provisions of this section relating to life insurance business shall apply also to accident and
health insurance.

Provided also that if the authority is satisfied that, the number and amount of the transactions
carried out by an insurer in health insurance business is so small as to render periodical
valuation unnecessary, he may exempt that insurer from the operation of this sub-section in
respect ofthat health insurance.

7) The valuation of liabilities under sub-section (1) shall be carried out in such a manner and on
such basis that the actuarial reserves calculated in that manner and on that basis are not less
than the actuarial reserves calculated in the manner and on the basis prescribed by the
provision.

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I nte ractive Qu esti on 2 :

a) Name the accounting statement that needs to be prepared at year end by an insurer. ln case of
company incorporated under the Companies Act who will sign these accounts?

5.4 Exemption from some provisions of Companies Act (section-33)

Unless contrary with any other Act, the Companies Act or any other Act kept under Companies
Act the insurer in any year furnishes his balance sheets and accounts in accordance with the
provision of section 15, may at the same time send to the registrar of companies copies of such
balance sheet and accounts, where such companies are so sent it shall not be necessary for the
company to file copies of the balance sheet and accounts and such copies so sent shall be
chargeable with the same fees and shall be dealt with in all respects as if they were filed in
accordance with that section.

5.5 Preservations and inspection of documents and supply of copies (section-36)

1) Every return furnished to the Authority or a certified copy thereof shall be kept by the Authority
and shall be open to inspection; and any person may procure a copy of any such return, or of
any part thereof, on payment of a fee prescribed by the authority.

2) A printed or certified copy of the accounts, statements and abstract furnished in accordance
with the provisions of section 32 shall, on the application of any shareholder or policy-holder
made at any time within two years from the date on which the document was so furnished, be
supplied to him by the insurer within fourteen days when the insurer is constituted,
incorporated or domiciled in Bangladesh and in any other case within one month of such
application.

3) A copy of the memorandum and Articles of Association of the insurer, if a company, shall on the
application of any policy-holder, be supplied to him within fifteen days by the insurer on
payment of fees prescribed by the authority.

5.5 Powers of the authority regarding returns (Section-37)

1) lf it appears to the Authority that any return furnished to it under the provisions of this Act is
inaccurate or defective in any respect, the Authority may:

a) require from the insurer such further information, certified if the authority so directs by an
auditor or actuary, as it may consider necessary to correct or supplement such return;
b) call upon the insurer to submit for its examination at the principal place of business of the
insurer in Bangladesh any book of account, register or other document or to supply any
statement which it may specify in a notice served on the insurer for the purpose;

c) examine any officer of the insurer in oath in relation to the return;

d) decline to accept any such return unless the inaccuracy has been corrected or the deficiency
has been supplied before the expiry of one month from the date on which requisition asking
for correction of the inaccuracy or supply of deficiency was delivered to insurer.

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2l lf the Authority declines to accept any such return, the insurer shall be deemed to have failed to
comply with the provisions of section 32 relating to the furnishing of returns.

5.7 Power of the authority to order revaluation (Section-38)

1) lf it appears to the Authority that an investigation or valuation to which section 30 refers does
not properly indicate the condition of the affairs of the insurer by reason of faulty basis adopted
in the valuation, it may after giving notice to the insurer and giving him an opportunity to be
heard, cause an investigation and valuation as such date as the Authority may specify to be
made at the expense of the insurer by an actuary appointed by the insurer for this purpose and
approved by the Authority and the insurer shall place at the disposal of the actuary so appointed
and approved all the material required by the actuary for the purpose of the investigation and
valuation with in such period not being less than three months, as the Authority may specify.

2) The provisions of sub-section (l) and (3) of section 30 and sub-section (1) and (2) section 32 shall
apply in relation to an investigation and valuation under this section. lt may be mentioned here
that the abstract and statement prepared as the result of the investigation and valuation shall
be furnished by such date as the Authority may specify.

5.8 Subsidiary company (Section-42)

1) The authority shall permit to any insurer if it deems to fit establish one or more subsidiary
company for regulating insurance business for the development and improvement or in public
interest of insurance business in Bangladesh.

2l ln spite of sub-section (1), any insurer may hold an amount of any companies share according to
prescribed manner.

6. Solvency Margin, Loan and Management of lnsurance business

6.1 Conditions to be fulfilled regarding solvency margin (Section-43)

'solvency Margin' refers to a certain amount of reserve fund maintained by an insurer as

determined by the Act. Conditions to be fulfilled for solvency margin are as follows:

1) Every insurer shall maintain solvency margin for its insurance business to an amount and in the
manner as provided by in the Act.

2) lf an insurer at anytime fails to maintain solvency margin as Per sub-section (l) above that
insurer shall submit a work plan to the Authority for making good the shortfall within the
maximum period of three months of the issuance of the order of the Authority in this regard.

3) The insurer shall only implement the work plan approved by the Authority and one that is found
in adequate by the authority should be revised by the insurer for approval.

4) For the purpose of examining or determining whether the solvency margin as determined by the
Authority has been fulfilled or not, the Authority shall have the right to inspect and verify the

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assets and liabilities of an insurer and collect other necessary information and the insurer shall
be bound to comply with the orders issued in this regard by the Authority. lf he fails to do so
within two months from the receipt of the order shall be deemed to have made default in
preserving solvency margin and in that case necessary action shall be taken under section 95 of
this Act.

5) Every insurer transacting life insurance business shall submit, a statement attested by an
actuary, showing the specific solvency margin maintenance related information of a life insurer
in the manner prescribed by the Authority.

6) For transacting non-life insurance business, every insurer shall submit a statement attested by
an authorized auditor showing the specific solvency margin maintenance related information of
a nonlife insurer in the manner prescribed by the Authority,

6.2 Restrictions in granting loan, advance and financial benefits (Section-44)

1) No insurer shall grant any loan, advance or other financial benefits against the security of its
own share.

2) No insurer shall grant to or any member of the family of any director, manager, actuary, auditor
or officer of the insurer any loan or temporary advance except a loan on life policy issued by the
insurer within the surrender value.

3) Except with the prior approval of the Board of Directors and consent of the Authority no insurer
shall grant any loan or temporary advance to any firm or company in which any director,
manager, actuary, auditor or officer of the insurer or member of the family of such director,
manager, actuary, auditor or officer has interest as proprietor, partner, director, manger or
managing agent.

4) The concern director shall not vote at or otherwise participate in the proceedings of the meeting
of the Board considering the grant of any such loan or advance.

5) The restrictions as mentioned under sub-section (l) and (2) above shall not be applicable or
advances granted by an insurer to a banking company or to a subsidiary company insurer or to
any insurer which is a subsidiary company.

6) No restrictions as mentioned in sub-section (l) shall apply to any stipend paid to any insurance
agent, broker or employer of agents while he is undergoing a course of training approved by the
Authority.

7) No insurer shall grant to any employee, insurance agent or employer of agents any loan or
temporary advances except-

a) loans on life policies issued by him to an employee, insurance agent or broker or employer
of agents with in their surrender value;

b) loans on mortgage of immovable property

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c) loans for the purchase of conveyance to an employee, insurance agent or employer of

agents provided that the concerned employee or agent has served the company continually
for such period as may be decided by the Board of Directors and the conveyance purchased
is mortgaged to the insurer.

d) temporary advances to an employee, insurance agent or employer of agents not exceeding

four months' salary in case of employees; in case of insurance agents, the renewal
commission earned by him during two years immediately preceding the date of application
for the advance or a sum not exceeding the fixed determined amount if he has not earned
renewal commission.

lnterdctive Question 3:

(a) what do you mean by the 'surrender value' of life insurance policies?

(b) Suppose that Mr. X takes out an endowment policy for L5 years for Taka 15,000 and the
premium payable is Taka 1,200 per annum. He pays premium for three years and then stops.
The premium paid is Taka L,200x 3 = Taka 3,600. The premium payable is Taka 1,200 x 15 =
Taka 18,000. Calculate the surrender value of the above policy.

7. lnvestigation and lnspection of information

7.1 lnvestigation of the functions of an insurer (Section-48)

1) the authority may investigate either fully or partly any insurer registered under this act, if it
a ppears-

(a) the insurer is incapable or it is possible to be incapable to repay his liability;

(b) the insurer has failed to comply with the provisions of this Act, regarding insurance fund;

(c) if the insurer does not submit within one month of having prior notice under section 49
necessary information accurately and satisfied;

(d) the insurer has failed to comply with the provisions of section 27,30,4'J.,43 and 44;
(e) if the profits of insurance premium are more comparing to the insurer's expenses of
insurance business or the collections reserve or expenditure of regulating business.

(f) Non-maintaining the procedure regarding distribution of expenses or special class of

expenses of insurer's insurance fund and other fund;

(g) The requirement of investigation regarding any information of the authority.

2) Before staring an investigation under this act the authority shall give a notice to the insurer
stating that the insurer may not transfer any assets in any condition before the completion of
the investigation under this Act, except without a written permission from the authority.

Explanation: The asset import in this section shall include the following assets, but shall not
limited in it-

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a) lmmovable property, ex: any land, building and a thing attached to iU

b) Movable property, ex: any furniture, equipments, book, magazine and any transferable
thing, any motor-cycle, boat, launch, aeroplane and other sizes transportation;

c) lnvestment, ex: any securities of state government or local government or any permissible
securities by the government or authority;

d) Other investments, ex: any incremental stock in the stock exchange, share, bond,
debenture, mutual fund or any no-incremental investments;

e) Cash, ex: deposited cash in any organization or agency, an amount of countable cash of bank
or loan

f) Other assets, ex: any remained premium, commission and paid or payable loan, advance,
securities, deposit and in favour of insurer or contractual or receivable ownership.

3) The authority may itself investigate or order an investigation appointed under sub-section (4) to
fiie a report to him within seven days after such investigation.

4) The authority may appoint an auditor, actuary or any other eligible person under this section,
except an auditor who audits the accounts and balance sheet and other particulars of the
insurer under section 27,for the investigation and expenses of such investigation shall be paid
by the insurer.

5) For regulating investigation under this Act the authority or investigator may-

(a) The insurer or any person appointed on behalf of the insurer;

(b) The existing director of the insurer or was a director at anytime or any person, actuary,
auditor, officer, employee or agent who has fulfil the duties of the director; or
(c) Any previous or present partner of the insurer, shall direct to present or use or full or partly
copy of any book, accounts and other documents concerning investigation including the
documents which proves the ownership of the insurer in Bangladesh or outside Bangladesh:

Provided that, the provisions of this section shall applicable only to the insurer holding
business in Bangladesh and also shall applicable to the insurer concerning such business
which proves the ownership of document.

6) The authority or investigator may order to present before him the person or person describe
under sub-section (5), for investigation under this section and may examine or ask statement
regarding business insurer.

7) lf the authority deemed it if after receiving report under this Act and after giving an opportunity
to the insurer to file application regarding report-
(a) Order the insurer to take necessary steps regarding any subject of report; or
(b) Cancel the registration of the insurer; or

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(c) Order any person to apply to the court for the winding up of the insurer, whether the
registration of the insurer has been cancelled under clause (b) or not.

8) lf the authority deems it necessary after giving prior notice to the insurer, may publish the
report of the investigation under this Act.
9) No order made under this section other than an order made under clause (b) of sub-section (3)
shall be called in question in any court.

10) lf any person after being ordered under sub-section (5) or sub-section (6) failed to present any
document kept under his control or present before the authority or investigator or declared or
failed to examine by them, then the authority or investigator may certify such declare in written
form by a courU and afterward the court may investigate the subject and after hearing evidence
in favour of or in favour of accused person and after hearing in favour of accused person may
punish the culprit person for the contempt of Court and Same.

7.2 Power of the authority to inspect and ask for information etc. (Section-49)

1) The Authority may from time to time inspect books, account and transactions of an insurer or
his branch office.

2) ln order to complete the above inspection the insurer will show his books, account and
documents to the inspector and also deliver necessary information and facilities.

3) For the purpose of fulfilling the objectives of this law, the Authority may if they deem it
necessary ask any director or office or nominee of an in insurerto

a. Provide any information; or

b. Order for appearing before him for supplying information regarding his business in
Bangladesh or outside Bangladesh and if necessary by written notice in the manner
provided in the Act in the place and time mentioned in the notice:

4) Anybody not willing to allow (a) conducting of this inspection or (b) violating any provisions of
this sub-section or (c) failing in complying with any necessary requirement of the Authority shall
to be treated as defaulter and the maximum penalty for this is taka 5 lacs and in case of
continuous default addition penalty is taka five thousand per day of default.

lnteractive Question 4:

a) Discuss the power of the lnsurance Development and Regulatory Authority (IDRA) to inspect and
ask for information etc. under the lnsurance Act, 2010.

7.3 Power of authority to direct the insurer (Section-50)

(1) The authority may, issue such directions as he may deem to any of the insurer if he is satisfied
that it is necessary to do so in the public interest, or to prevent the affairs of any insurer being
conducted in any manner detrimental to the interests of the policy-holders of the insurer can
direct to take the following affairs, example:

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(a) To take necessary action or appoint manpower in the management for regulating insurer's
insurance business according to the provisions of this Act;

(b) lf there is reason to believe, the authority may, after giving chance to surrender remove
from the posts any person as the chairman, any director, advisor, principal officer or in any
name called and by holding such post there has been violation of provisions of this Act, and
the violation is of such kind that, it shall be detrimental for the interest of the policy holder
or insurer if being associated with them or otherwise undesirable.

Provided that, if it appears to the authority that the delay shall be detrimental for the insurer or
policy holder of such insurer, then in time of giving an opportunity to surrender or any time
afterward if there is applied for surrender, the authority shall in time of considering order that,
such director or principal officer from such date of the order-

i. such director or principal officer shall cease to hold such office;

ii.shall not be in the connection or take part in them an agreement of the insurer's either
directly or indirectly.
iii. shall not take action regarding dismissalor re-salving in the assets in the assets of insurer;
iv. the authority shall salve any cash from the insurer if it appears to the authority that cash has
been paid-up by unlawfully; or
v. Shall restrain from declaring policy or renewal of policy regarding such class of insurance
business prescribed in the order.

7.4 Power to order calling of meeting of directors of the insurer (Section-S1)

The Authority may, during the course, or after the completion of special audit or investigation by
order in writing require the insurer:

a) to call a meeting of its directors for the purpose of considering

b) any matter relating to or arising out of the affair of the insurer'

c) the principal officer of the insurer to discuss any matter with him or any of his officers;

d) to allow any officer deputed for the purpose to watch the proceedings of, and to speak at
any meeting of Board of Directors of the insurer or of any committee or other body
constituted by the insurer and to furnish such officer with a copy of the proceedings of the
meeting;

e) to allow any officer appointed or deputed for the purpose to observe for specified period
which may be extended from time to time, the manner in which the affairs of the insurer or
of any of his officers or branches are being conducted;

f) to make with in such time as may be specified in the order such changes in the management
as the Authority may consider necessary to Put the affairs of the insurer in order.

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8. Transfer of the title of policy and nomination

8.1 Nomination by the insurance policy holders (Section-S7)

1) The holder of a policy of life insurance on his own life, may, when effecting the policy or at any
time before the policy matures for payment, nominate the person or persons to whom the
money secured by the policy shall be paid in the event of his death:

Provided that where any nominee is a minor, it shall be lawful for the policy-holder to appoint in
the prescribed manner any person to receive the money secured by the policy in the event of his
death during the minority of the nominee.

2) Any such nomination in order to be effectual shall, unless it is incorporated in the text of the
policy itself, be made by an endorsement on the policy communicated to the insurer and
registered by him in the records relating to the policy and any such nomination may at any time
before the policy matures for payment be cancelled or changed by an endorsement or a further
endorsement or a will, as the case may be, but unless notice in writing of any such cancellation
or change has been delivered to the insurer, the insurer shall not be liable for any payment
under the policy made bona fide by him to a nominee mentioned in the text of the policy or
registered in records of the insurer.

3) The insurer shall furnish to the policy-holder a written acknowledgement of having registered a
nomination or a cancellation or change thereof, and may charge a fee not exceeding one Taka
for registering such cancellation or change.

4l A transfer or assignment of a policy made in accordance with section 38 shall automatically

cancel a nomination:

Provided that the assignment of a policy to the insurer who bears the risk on the policy at the
time of the assignment, in consideration of a loan granted by that insurer on the security :-ri the
policy within its surrender value, or its re-assignment on repayment of the loan shaii ncr cancel
a nomination, but shall affect the rights of the nominee only to the extent of the insurer's
interest in the policy.

5) Where the policy matures for payment during the lifetime of the person whose life is insured or
where the nominee or, if there are more nominees, than one, all the nominees die before the
policy matures for payment, the amount secured by the policy shall be payable to the policy-
holder or his heirs or legal representatives or the holder of a succession certificate, as the case
may be.

6) Where the nominee or, if there are more nominees than one, a nominee or nominees survive
the person whose life is insured, the amount secured by the policy shall be payable to such
survivor or survivors.

7) The provisions of this section shall not apply to any policy of life insurance to which section 6 of
the Married Women's Property AcL,1874, applies or has at any time applied:

Provided that where a nomination made whether before or after the commencement of this Act, in
favour of the wife of the person who has insured his life or of his wife and children or any of them is
expressed, whether or not on the face of the policy, as being made under this section, the said sub-
section 6 shall be deemed not to apply or not to have applied to the policy.

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lnteroctive Question 5:

a) What is meant by Assignment and Nomination of Life lnsurance Policies? Mention the various
rules regarding assignment of life policies.

9. Commission, Rebate and Management cost

9.1. Prohibition of payment by way of commission or otherwise for procuring business

(Section 58)

1) No person shall pay or contract to pay any remuneration or reward whether by way of
commission or otherwise for soliciting or procuring insurance business in Bangladesh to any
person except an insurance agent or employer of agent or broker.

2) No person shall pay or no insurance agent shall receive any renewal commission in respect of a
life insurance business after the expiry of license during the validity of which such business was
procured by the insurance agent unless such license has been renewed under sub-section (l) of
section 124.

3) No insurance agent shall be paid or contract to be paid by way of commission or as

remuneration in any form an amount exceeding in the case life insurance business as -
a) 35% of the first year's premium
b) LO% of the second year's renewal premium
c) 5% of the of the subsequent years' renewal Premium

Provided that, an insurer in respect of life insurance business may pay, during the first ten years
of their business to the insurance agent commission as follows:
a) 45% of the first year's premium
b) 1.2% of the second year's renewal premium
c) 6% of the subsequent year's renewal Premium
4) For the purpose of sub-section (2) all the life insurance business to the credit of an insurance
agent shall be deemed to have been procured by the insurance agent while holding the license
valid.

5) No insurance agent shall be paid or contract to be paid by way of commission or as

remuneration in any form any amount in respect of any policy not effected through him.

9.2 Limits on commission expense (Section 59)

1) No person shall pay or contract to pay an insurance agent and no insurance agent shall receive
or contract to receive, by way of commission not exceeding the prescribed one or remuneration
in any form, in respect of any policy of life insurance issued in Bangladesh by an insurer.

Provided that, this percentage shall not exceed the rate prescribed in clause (a) of sub-section 3
of section 58.

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2l No person shall pay or contract to pay to an insurance agent and no employer of insurance
agent shall receive or contract to receive by way of commission not exceeding the prescribed
percentage rate or remuneration in any form in respect of life insurance policy effected through
an insurance agent.

3) No person shall pay or contract to pay to an insurance agent by way of commission not
exceeding the prescribed percentage rate or remuneration in any form in respect of non-life
insurance policy effected through an insurance agent in Bangladesh.

4) No person shall pay or contract to pay to a broker by way of commission not exceeding the
prescribed percentage rate or any overriding commission or remuneration in any form in
respect of non-life insurance policy effected through an insurance agent in Bangladesh.

5) No person shall pay or contract to pay to any outside Bangladesh by way of commission in
respect of conducting insurance business in Bangladesh.

6) lf any insurer, insurance agent, employer of insurance agent and broker contravenes any of the
provisions of sub-section (1), (2), (3), (4) and (5) shall be punishable with fine not exceeding one
lac taka for such violation.

7) An insurer incorporated outside Bangladesh who receives or contract to receive any commission
in respect to any business transacted in Bangladesh and reinsured aboard shall not be deemed
to have contravened the provision of sub-section (5) if all amounts received by him outside
Bangladesh in respect of have been fully credited according to the prescribed provision of the
government.

9.3 Restrictions On Allowing Rebate (Section-50)

1) No person shall allow or offer to allow, either directly or indirectly, as an inducement to any
person to take out or renew or continue an insurance in respect of any kind of risk relating to
lives or property in Bangladesh any rebate of the whole or part of the commission payable or
rebate of the premium shown on the policy, nor shall any person talking out or renewing or
continuing a policy, nor shall any person taking out or renewing or continuing a policy accept
any rebate, except such rebate as may be allowed in accordance with the published prospectus
or table of the insurer.

Provided that, the acceptance by an insurance agent of commission in connection with a policy
of life insurance taken out by himself on his own life shall not be deemed to be acceptance of a
rebate of premium within the meaning of this sub-section if at a time of such acceptance the
insurance agent satisfies the prescribed conditions establishing that he is a bonafide insurance
agent employed by the insurer.

2) Any person making default in complying with this section shall be punishable with fine in
accordance with the prescribed provision.

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 Corporute Luws and Practices

9.4 Limitation of expenses of Management in life insurance business (Section-G2)

1) No insurer shall, in respect of life insurance business transacted

by him in Bangladesh spend as
expenses of management in any calendar year an amount in excess of the prescribed limit and
in prescribing any such limits regard shall be had to the size and age of the insurer and the
provision generally made for expenses of management in premium rates of insurers.

It may however, be mentioned here that the Authority may on an application made to him in
this behalf, condone the contravention of this sub-section by an insurer who has, on reasonable
ground, has spent management expenses in excess of such limit.

2) Every insurer transacting life insurance business in Bangladesh shall incorporate in the revenue
account a certificate signed by the chairman and two directors and by the principal officer of the
insurer, and an auditor's certificate, certifying that all expenses of management in respect of life
insurance business transacted by the insurer in Bangladesh have been fully debited in the
revenue account as expenses.

Explanation: "Expense of Management" - in this section means all charges wherever incurred
whether directly or indirectly, and includes the following:
a) rcrnmission payment of all kinds;
b) a proper share of expenses capitalized; and
a) in the case of insurer having its principal place of business outside Bangladesh a proper
share of head office expenses which shall not exceed such percentage of total net premiums
as prescribed but shall not include any share of head office expenses in respect of life
insurance business transacted by him outside Bangladesh,

9'5 Limitation of expenses of management in non-life insurance business (Section-G3)

1) No insurer shall in respect of any class of non-life insurance business transacted by him in
Bangladesh spend in any calendar year as expenses of management, an amount in excess of the
prescribed limits and in prescribing any such limits, regards shall be had to the size and age of
the insurer.

It may however, be mentioned here that the Authority may on an application made to him in
this behalf condone the contravention of this sub-section by an insurer who has, on reasonable
ground, spent management expenses in excess of such iimit.

2) Every insurer as aforesaid shall incorporate in the revenue account a certificate signed by the
chairman, two directors and the principal officer of the insurer, and an auditor's certificate
certifying that all expenses of management wherever incurred whether directly or indirectly in
respect of the business referred to in this section have been fully debited in the revenue account
as expenses.

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Self-test quest:on:

1.. Distinguish between reinsurance and double insurance. Discuss about the rules applicable in
double insurance.

2. What is reinsurance? What are the rights of a reinsurer?

3. Discuss rules regarding paid up capital requirements of insurance company as per provision of
the lnsurance Act, 2010.

4. Discuss some grounds under which loan of lnsurance Company are prohibited

5. Discuss the prohibition on giving and accepting any rebate of premium, as enacted in the
lnsurance Act, 2010.

6. What is solvency margin? Mention the conditions to be fulfilled by an insurer for maintenance
of Solvency Margin.

7. What is the amount of minimum deposit is required for an insurance company?

8. Where and how the assets of life and general insurers are to be invested?

9, Under what grounds an insurance company can be wound up by the Court?

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 Corporate Laws und Practices

Answer to Self-test:

Answer to self-test 1:

Double lnsurance vs. Re-insurance

1.. lf the same risk and the same subject are insured by the policy-holder with more than one
insurer, it is called double insurance. Re-insurance means the transfer of the part of the risk by
the insurer.

2. lf there are double insurances of properties, the loss will be shared by all the insurers. ln the
case of life insuranceallthe insurers are liable. ln re-insurance, the re-insurer is entitled to get a
proportionate part of the premium, and will be liable for a proportion of part of the loss.

3. The re-insurer is liable only to the first insurer. ln double insurance each insurer is liable directly
to the policy-holder.

4. Double insurance is a method of assuring the benefit of insurance. ln the case of life insurance,
the insured rnay have any number of policies and for any amount. Re-insurance is a method of
reduc!ng of the risk of the insurer.

The fallouEing rules apply in the case of double insurance

1.. Life: no limit. ln the case of life insurance there may be any number of policies for any amounts.
A man is entitled to place any value he likes upon his life and therefore upon death, all the
policies are payable whatever the total amount may be.

2. Property: not more than actual loss. A person is free to insure his property with any number of
insurers. But in case of loss occurring, he will not be allowed to recover more than the actual
loss from all the insurers together. This amount will be shared between the insurers in
proportion to the value of each insurer's policy. lf any one of the several insurers pays the whole
loss, he is entitled to contribution from the other insurers.

Answer to self-test 2:

Re-insurance:

Reinsurance means the transfer of a part of the risk by the insurer. Suppose, that a ship has been
insured for Tk. L0 lakhs. The insurer may feel that the risk is too heavy to be borne by him alone. lf so,
he can transfer a part of the risk to another insurer. So, reinsurance takes place between two insurance
companies.

Rights of Re-insurer:

1. Re-insurer is entitled to get a proportionate part of the premium.

2. Re-insurer gets the benefits of the conditions and terms of the original policy

3. Re-insurer is entitled to subrogation.

4. lf for any reason the original policy lapses, the re-insurance comes to an end.

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 Corporate Laws snd Practices

Answer to self-test 3

As per section 21 of the lnsurance Act, 2O1O lnsurance company of different natures are required
minimum paid up capital as follows:

(a) For life insurance business:

(i) For companies incorporated in Bangladesh:

Minimum 30 (thirty) crore taka of which 60% (sixty) shall be subscribed by the sponsors and the
balance 40% (f ortv) shall be open for public subscription.

(ii) For companies incorporated outside Bangladesh:

Minimum 30 (thirty) crore taka which shall be Brought to Bangladesh through remittance from
abroad and be kept deposited into Bank

(b) For non-life insurance business:

(i) For companies incorporated in Bangladesh:

Minimum 40 (forty) crore taka of which 60% (sixty) shall be subscribed by the sponsors and the
balance 40% (forly) shall be open for public subscription.

(ii) For companies incorporated outside Bangladesh:

Minimum 40 (forty) crore taka which shall be Brought to Bangladesh through remittance from
abroad and be kept deposited into bank.

Answer to self-test 4:
As per section 44 of the lnsurance Act, 2010 the following grounds under which loan of insurance
company are prohibited.
1. No insurer shall grant to any loan, advance or financial advantages on his personal deposited
sha res.

2. No insurer shall grant to or to any member of the family of, any director, manager, actuary,
auditor or officer of the insurer any loan or temporary advance, either on hypothecation or
properly or on personal security or otherwise, except a loan on life insurance policy issued by
the insurer within the surrender value.

3. Except with the prior approval of the Board of Directors and the authority, no insurer shall grant
any loan or temporary advance to any firm or company in which any director, manager, actuary,
auditor or officer of the insurer, or the member of the family of such director, manager, actuary,
auditor or officer, has any interest as proprietor, partner, director, manager or managing agent'

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 Corporate Luws and Practices

4. The Director concerned shall not vote at or otherwise participate in the proceedings of the
meeting of the Board considering the grant of any such loan or advance as is referred to in sub-
section (2).

5. Where any event occurs giving rise to circumstance the existing of which at the time of the grant
of any subsisting loan or temporary advance would have made such grant a contravention of
sub-section (1) or sub-section (2), such loan shall not withstanding any contract to the country,
be repaid within three months from the occurrence of such event and, in case of default, the
director, the manager, actuary, auditor or officer concerned shall, without prejudice to any
other penalty to which he may be liable, cease to hold office with the insurer granting the loan
or advance on the expiry of the said three months.

5. Nothing in sub-section (1) or sub-section (2) shall apply to loans or advances granted by an
insurer to a banking company or to a subsidiary company being an insurer or to any insurer to
which the insurer granting the loan or advance is a subsidiary company.

7. Nothing in sub-section (1) shall apply any stipend paid to any insurer agent, broker or employer
of agents while he is undergoing a course of training approved by the authority.

8. The provisions of Companies Act shall not apply to a loan granted a director of an insurer being
a company, if the loan is one granted on the security of a policy on which the insurer bears the
risk and the policy was issued to the director on his own life and the loan is within the surrender
value of the policy.

9. Subject to the provision of sub-section (1) no insurer shall grant to any employee, insurance
agent, broker or employer of agent any loan or temporary advance except-

a) loans on life policies issued him to employee, insurance agent or broker or employer of agents
within their surrender value;

b) loans on mortgage of immovable property provided-

the authority certified that the insurer, if he transacts life insurance business has
complied with the provisions of this section:

ii the value of the property is at least twice the amount of the loan;

iii the property is situated in such town as may be notified in this behalf;

iv the loan is made in such installments as may be decided by the Board of directors of the
insurer, if the purpose of the loan is to continue a house;

the loan is repayable within a period of fifteen years, or

vi the loan is of such amount that the installment of capital and interest does not exceed
one-fourth of the basic salary of the employee or one-fourth of the renewal commission
or overriding commission of an agent, broker or employer of agents, as the case may be,
during a year;

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 Corporate Laws and Practices

c) loans for the purchase of a conveyance to an employee insurance agent or employer of agents,
provided-
i. the employee, insurance agent or employer of agents has served the insurer continually for
such period as may be decided by the Board of Directors of the insurer;
ii. the conveyance purchased is mortgaged to the insurer;
iii. the loan does not exceed such amount, and is subject to such conditions as the time
allowed for its payment as may be decided by the Board of Directors of the insurer;

provided that, the total loan regarding non-life insurance referred to in sub-clause (b)(iv) and (c) shall
exceed ten percent of the non-profit of the preceding year of the insurer after payment of income tax;
Further provided that, the amount 10 percent of loan of first percentage shall or more than 20 percent
of paid-up capital of the insurer;

d) ln case of temporary advance to an employee, insurance agent or employer of agents-

i. in the case of employee and manager an equal amount of salary not mcre than four
months;

ii. in the case of an insurance agent, the renewal commission earned by him during two
years immediately preceding the date of the application for the advance and if he has not
earned renewal commission, the amount not exceeding the prescribed amounU

ilt in the case of an employer of agents, the renewal commission and the overriding renewal
commission earned by him during the year immediately preceding the date of application
for the advance, and if he has not earned any renewal commission or over-riding renewal
commission an amount not less that the prescribed amounU

Provided that, in respect of the life insurance business of an insurer, the total temoorar'; suvdhCes
referred to in this clause shall not exceed the amount prescribed in percentage rate and in other cases
also shall not exceed the amount fixed.

Answer to self-test 5:
According to Section 60 of the lnsurance Act 2010, no person shall allow or offer to allow, either directly
or indirectly, as an lnducement to any person to take out or renew or continue an insurance in respect
of any kind of risk relating to lives or property in Bangladesh any rebate of the whole or part of the
commission payable or rebate of the premium shown on the policy, nor shall any person taking out or
renewing or continuing a policy accept any rebate, except such rebate as may be allowed in accordance
with the published prospectus or tapes of the insurer;
Provided that the acceptance by on insurance agent of commission in connection with a policy of life
insurance taken out by himself on his own life shall not be deemed to be acceptance of a rebate of
premium within the meaning of this sub-section if at a time of such acceptance the insurance agent
satisfies the prescribed conditions establishing that he is a bonafide insurance agent employed by the
insurer. Any person making default in complying with the provisions of this section shall be punishable
with fine in accordance with the prescribed provision.

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 Corporate Laws and Practices

Answer to self-test 6:

Solvency margin:

Solvency Margin refers to a certain amount of reserve fund maintained by an insurer as determine by
the Act.
Conditions to be fulfilled by an insurer for maintenance of Solvency Margin:
As per Section 43 of the lnsurance Act, 2010 below mentioned conditions to be fulfilled for solvency
margin:
L. Every insurer shall maintain solvency margin for its' insurance business to an amount and in the
manner as provided by in the Act.

2. lf an insurer at any time fails to maintain solvency margin as per sub-section (l) above that
insurer shall submit a work plan for the Authority for making good the shortfall within the
maximum period of three months of the issuance of the order of the Authority in this regard.

3. The insurer shall only implement the work plan approved by the Authority and one that is found
in adequate by the authority should be revised by the insurer, for approval.

4. The purpose of examining or determining whether the solvency margin as determined by the
Authority has been fulfilled or not, the Authority shall have the right to inspect and verify the
assets and liabilities of an insurer and collect other necessary information and the insurer shall
be bound to comply with the orders issued in this regard by the Authority,

5. Every insurer transacting life insurance business shall 'submit, a statement attested by an
actuary, showing the specific solvency margin maintenance related information of a life insurer
in the manner prescribed by the Authority.

6. For transacting non-life insurance business, every insurer shall submit a statement attested by
an authorized auditor showing the specific solvency margin maintenance related information of
a non-life insurer in the manner prescribed by the Authority.

Answer to self-test 7:

As per Section 23 of the lnsurance Act, 2010 insurance business require deposit to be maintained as
follows:

(i) For life insurance business:

L(one) crore and 50 (fifty) lac taka. ln case of a company incorporated before the commencement of this
Act, such deposit shall be made within three years of giving effect of this law.

(ii) For of non-life insurance business:

2 (two) crore 50 (fifty) lac taka. ln case of a company incorporated before the commencement of this
Act, such deposit shall be made within three years of giving effect of this law.

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 Corporate Laws and Practices

Answer to self-test 8:

As per Section 41 of the lnsurance Act, 2010

L. Every insurer shall invest and at all times keep invested his assets in the manner and place provided
by the Act and the Authority shall have the power to control those investments.
It may be mentioned that, no investment shall be permissible in the first issue of capital by a company,
firm or other business concern in which any of the directors of the insurer or any member of the family
of such director has any interest as proprietor, Partner, director, manager or managing agent.
2. Every insurer shall submit to the authority the returns of investment according to the manner
prescribed in sub-section (1).

Answer to self-test 9

An insurance company can be wound up by the Court under the same grounds for which a company can
be wound up under the Companies Act. ln addition to the ground on which such an order may be based,
the Section 103 of lnsurance Act, 2010 states Court may order the winding up of an insurance company
under the following circumstances:
f . if a petition is presented by shareholders representing not less than one-tenth cf the whole body of
shareholders and holding not less them one tenth of the whole share capital or by not less than five
hundred (500) policy holders holding policies of life insurance that have been in force for not less than
three years and are of the total value of not less than the value as may be prescribed under this Act.
2. if the company has failed to deposit or to keep deposited with the Bangladesh Bank the required
amounts under section 23 and I 19 of the Act.
3. if the company having failed to comply with any requirement of this Act has continued such failure or
having contravened any provision of this Act has continued such contravention for a period of three
months after notice of such failure or contravention has been conveyed to the company by the
Authority.
4. if it appears from the returns furnished under the provisions of this Act or from the resuli- .:f any
investigation made there under that the company has failed to maintain the required solvency margin.
5. if the continuance of the company is prejudicial to the interest of the policy-holders.

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 Corporate Laws and Practices

Answer to lnteractive Question

Answer to lnteractive Question 1:

i. Determination of rate of premium for non-life insurance business (Section 17)

L. The Authority shall form a Central Rating Committee (CRC) and in consultation with this
committee shall determine the rate of premium for non-life insurance business which the
insurers shall be bound to comply with.

2. The Chairman of the Authority shall be the chairman of the CRC and the number of its members,
Power, functions and management shall be determined by the regulation.

3. The government may if required dissolve the CRC at any time.

ii. Provision relating to collection of premium (Section 18)

1'. Every insurer shall declare to the Authority the total amount of premium outstanding including
agent balance, if any, in respect of fire, marine and miscellaneous insurance business within 30
days from the commencement of this Act and shall recover the same with in such time as may
be aiiowed by the Authority.

2. No insurer shall write off any outstanding premium in respect of non-life insurance business
without prior approval of the Authority.

3. No insurer shall assume in Bangladesh any risk in respect of non-life insurance business unless
and until the premium payable or such part thereof has been received or guaranteed to be paid.

Answer to lnteractive Question 2:

As per Section 27of lnsurance Act 2010, every insurer in respect of all insurance business transacted by
him in Bangladesh shall at the expiration of each calendar year prepare with reference to that year the
following statements:

a) balance sheet, in the form and procedures set forth in the Act;

b) profit and loss account in the form set forth in the Act;

c) in respect of an insurer who is required under this law to keep a separate account of receipts
and payments, a revenue account in the form set forth under the provisions of this Act; and

d) a statement containing the names and descriptions of the persons in charge of management of
the business during the year and a report on the affairs of the business

lf the insurer is a company under the Companies Act, the balance sheet, profit and loss account, revenue
account and the report under sub-section (l) shall be signed by the Chairman, two directors and the
principal officer of the company, or in the case of a cooperative society under the Co-operative Societies
Act shall be signed by two members.
 Corporute Laws snd Practices

Every insurer shall maintain fund related account of his shareholders and policy holders separately in
accordance with the provisions of the Act.

Answer to Interactive Question 3:

(a) Surrender Value:

prior to the passing of the lnsurance Act 1938 nonpayment of premium at any time involved
cancellation of the contract of insurance and forfeiture of the premium paid. As this involved
considerable hardshlps, section 88 of the lnsurance Act 201-0 provides that a life insurance policy will not
lapse for nonpayment of premiums if certain conditions are fulfilled. Section 88(1) provides that
surrender value will be acquired if premiums have been paid for at least two years. After premiums have
been paid for the requisite period the policy acquires what is called Surrender Value. The surrender
value is obtained by multiplying the sum assured by a fraction. The premium actually paid is the
numerator of the fraction and the premium payable is the denominator. The surrender value of
bonuses, declared before default, are to be added.

x
(b) Surrender Value = (Premium paid/premium payable) sum insured

The ratio between the two is Tk. 3,600 / Tk. 18,000= 1/5. The surrender value of the policy is 1/5 x Tk.
15,000= Tk. 3,000

Answer to lnteractive Question 4:

Power of IDRA to inspect and ask for information etc. (Section 49)

1. The IDRA may from time to time inspect any looks, accounts and transactions of the insurer or
of its branch office.

2. For the purpose of investigation to the insurer shall show their books, accounts and documents
to the investigator and also provide necessary information'

3. The IDRA ay in written notice require any director of the insurer, officer, agent to deliver any
information regarding business or order him to be present before him at the time and place as
prescribed in the notice.

4. lf any person disagrees regarding inspection or viola tab any provisions or failed in fulfilling any
requirements he shall be accused guiltyforthis and be conflned a penaltyforTk.5 Lac and if the
offence continues additional penalty Tk. 5 Thousand per day.

Answer to lnteractive Question 5:

Nomination by the policy holder (Section 57):

The holder of policy of life insurance on his own life may, when effecting the policy or at any time before
the policy matures for payment. Nominate the person or persons to whom the money secured by the
policy shall be paid in the event of his death. This is known as nomination by the policy holder' The
person named is called the nominee.

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 Corporate Laws and Practices

Assignment of !ife policies (Section 55):

It has been long before that life insurance policies are marketable commodities which can be validly
assigned with or without consideration, to persons who have no interest in the life insured. The principle
namely, the assign ability of the life insurance policies is accepted in modern times and permitted by
law.

Rules regarding assignment of life policies (Section 55):

The lnsurance Act, 2010 contains the following rules regarding assignment of life policies:

1. Procedure
A transfer or assignment of life policies whether with or without consideration may be made only by an
endorsement upon the policy itself or by a separate instrument, signed in either case by the transferor
or by the assignor or his duly authorized agent and attested by at least one witness.

2. Notice
The transfer or assignment shall be binding upon the insurer after a notice in writing and endorsement
on the instrument or a certified copy thereof is delivered to him.

3. Priority
ln case of more than one assignment the priority of the claims of the assignees shall be governed by the
order in which the notice to the insurer is delivered.

4. Written acknowledgement
Upon receipt of the notice, the insurer is bound to give a written acknowledgement of the receipt of the
notice if the person giving the notice or the assignee demands such acknowledgement and pays a fee as
prescribed by the rules.

5. Recognition
From the date of notice the insurer shall recognize the assignee named in the notice as the only person
entitled to benefit under the policy. The assignee can, if necessary, sue without the consent of the
assignor.

6. Conditional assignment
There may be assignment in favor of a person subject to condition that it shall be inoperative or that the
interest shall pass to some other person on the happening of a specified event during the life time of the
person whose life is insured.

7. Survivorships
There may be an assignment in favor of the survivors of a number of persons

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 Corporate Laws and Pructices

Chapter 7

Financial Reporting Act, zOLs

Contents

lntroduction
Examination context
Topic list
T Definitions (Sec 1)
2 Establishment of the Council (Sec 3)
3 Structure of the Council (Sec 5)
4 Procedures for separation of any members of the Council (Sec 6)
5 General objectives of the Council (Sec 7)
6 Powers and functions of the Council (Sec 8)
7 lncapacity of Executive Directors and Chairman (Sec 13)
8 Working divisions of the Council (Sec 22)
9 Responsibilities of Standard Setting Division (Sec 23)
10 Responsibilities of Financial Reporting Monitoring Division (Sec 24)
1.1. Responsibilities of Audit Practice Review Division (Sec 24)
1.2 Functions of Enforcement Division (Sec 25)
13 Enlistment of Auditors (Sec 31)
1.4 Application for enlistment of auditors (Sec 32)
L5 Cancellation of enlistment certificate (Sec 33)
16 Unapproved audit practice (Sec 34)
17 Auditors' report and opinion (Sec 35)
18 Serious Misconduct (Sec 36)
19 lndependence of auditors while carrying out responsibilities (Sec 37)
20 Standards settings and publication (Sec 40)
21, Auditing practice monitoring of the auditors of Public lnterest entities (Sec 46)
22 Obligations to follow financial reporting and auditing standards (Sec 47)
23 lnvestigation of the complaints (Sec 50)
24 Appeal against the decision of the Council (Sec 53)
25 Appeal authority (Sec 54)
26 Power of issuing Rules (Sec 70)
Summary and Self-test
Answers to Self-test
Answers to lnteractive questions

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 Corporate Laws and Pructices

lntroduction

Leorning objectives Tick off

Estqblishment, structure and separotion of members of the Council (FRC)

General objectives, powers ond functions of the Council

lncopocity of Executive Directors and Choirmon of the Council

Working divisions, their responsibilities and functions

Applicotion for enlistment of ouditors, concellation, etc.

Audit proctices, unopproved audit practices, reports and opinion, etc.

lndependence of auditors while carrying out responsibilities

Standard setting ond publication, etc.

Auditing proctice monitoring of the ouditors of Public lnterest entities

Obligotions to follow finonciol reporting and auditing stondords

lnvestigotion of the comploints

Appeal authority, etc.

Power of issuing rules

P ra ctico I si g n ifi co nce

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 Corporate Lah)s and Practices

Proctically whenever people wont to stort public proctice ofter getting the certificote from the
professionol institutions, they need to know the audit procedures ond oll other relevont legol ond
regulatory fromework including the Finoncial Reporting Act 2015. The Financial Reporting Act 2015 will
help to know the details regulotory ospects ond also the guidelines of reporting ond ouditing fromework.
This act will help the professionols in maintoining high stondards of financial reporting as per the
globally occepted reporting framework os well as performing auditing mointoining globolly accepted
stondords of ouditing, i.e. lSA.

Stop ond think

What things con you think of thot dre essentiol for finonciol reporting and ouditinq the finonciol
stotements? Whot are the impoct of this regulatory oct? Have you stopped to think obout how this
offects the proctice of o professionol?

Working context

You might need to understand the impoct of finonciol reporting and ouditing to the stokeholders of
Public lnterest Entities ond also this Act on the practice of the professionols.

Syllobus links

Finonciol Reporting Act, 2015 of Bongladesh.

Examinotion context

Exom requirements

Financial Reporting Act 2015 is on importont port of the syllabus. Typicolly, fifteen percent of the
questions come from the part of Financiol Reporting Act. Understonding the basic precepts reloting to
this oct is vitol. Other thon Finoncial Reporting Act, you moy also expect questions from ICAB Bye-Laws
reloting to public practice.

You are likely to be presented with scenarios and may have to conclude on establishment, structure and
separation of members of the Council (FRC), general objectives, powers and functions of the Council,
incapacity of Executive Directors and Chairman of the Council, working divisions, their responsibilities
and functions, application for enlistment of auditors, cancellation, etc., audit practices, unapproved
audit practices, reports and opinion, etc., independence of auditors while carrying out responsibilities,
standard setting and publication, etc., auditing practice monitoring of the auditors of Public lnterest
entities, obligations to follow financial reporting and auditing standards, investigation of the complaints,
appeal authority, etc., power of issuing rules.

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 Corporate Laws und Practices

1. Definitions (Sec 1)

L. "Financial year" means the time period, whether it is a full year or not, for which the profit
or loss account of a public interest entity will be submitted in its AGM. (Sec 2(2))

2. "Financial statements" interim or final statement of financial position, statement of profit

or loss or income statement, statement of changes in equity, statement of cash flows and
notes to the financial statements and their explanations. (Sec 2(3))

3, "Council" means the Financial Reporting Council made under sec 3 of this Act. (Sec 2(6))

4. "Public lnterest Entity" means -

i. The entity which will satisfy anyone of the following determinants:
1. Bank Companies established under sec 5 (Na) of the Banking Companies Act 1991;
2. Organization which has issued Securities and has the obligation to submit report to
the Bangladesh Securities & Exchange Commission under Sec 15 of the Bangladesh
Securities & Exchange Commission Act 1993;
3. Financial lnstitution as defined in Sec 2 (Kha)of the Financial lnstitution Act 1993;
4. Microcredit Organization as defined in Sec 2(21) of Microcredit Regulatory Authority
Act 2006;
5. lnsurer as defined in Sec 2 (25) of the lnsurance Act 20L0;
6. Any organization yearly revenue of which has crossed the limit of last year revenue
as notified by the council through Govt. Gazette;
7. Any organization which has fulfilled any two of the following conditions at the end of
last year:
a. lt has recruited the minimum number of persons by regulation;
b. Total asset of this crossed the limit fixed by the Council in the official Gazette;
c. Total liabilities excluCing shareholders' equity has crossed the limit fixed by the
Council in the official Gazette notification;
ii. The following organizations fulfilling the conditions as set out in sub-section d(i):
t. Company or commercial organizations under the ownership of Government;
2. Statutory authorities;
3. Non-Govt. organizations directed by individuals; and
4. Other such organizations. (Sec 2(8))

5. "Scheduled auditor" means any auditor for the purpose of auditing the public interest
entities as per the provision of Chapter 5 of this Act. (Sec 2(9))

6. "Auditor" means any person or the owner, partner or employee of any audit firm related
with providing the audit services who is registered with any professional accountancy body.
(sec 2(13))

7. "Audit firm" means any firm or organization directed by any persons or partners in order to
provide audit services whether registered or not. (Sec 2(15))

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 Corporate Laws and Practices

8. "Professional accountant" means the members of the organizations as per sec 2 (19) of this
Act. ln order to fulfil the function, the members of the lnstitute of Chartered Accountants of
Bangladesh under the Bangladesh Chartered Accountants Order, 1973 and the members of
the lnstitute of Cost and Management Accountants of Bangladesh under the lnstitute of
Cost and Management Accountants Ordinance,lgTT will be directed. (Sec 2(18))

9. "Professional Accountancy Organizations" means the institute of Chartered Accountants of

Bangladesh under Bangladesh Chartered Accountants Order, 1973 (P.O. No. 2 of 1973) and
the lnstitute of Cost and Management Accountants of Bangladesh under the (Cost and
Management Accountants Ordinance,1977 (Ordinance No. Llll of 19771. (Sec 2(19))

10. "Financial Reporting Standards" means the financial reporting standards as outlined in sec
40 of this Act. (Sec 2lzLll

11. "Annual Report" means the evidence which contains the financial statements of the public
interest entities, the audit report thereon and the statements provided by the directors of
those entities along with the operational reflection. (Sec 2(22))

2. Establishment of the Council

t. Government, after the enactment of this act, shall establish a Council through notification in
the Government Gazette which shall be named as the Financial Reporting Council. (Sec 3(1))
2. Council shall be a statutory organization and it shall have permanent continuity and general
seal, and as per the provisions of this Act, it shall have the power to acquire both immovahl:
and moveable assets, keep in its position or transfer and it shall use its own name t": ;ue a
case and a case can be sued against its name. (Sec 3(1))

3. Structure of the Council

1.. The council shall be composed of the following members (Sec 5 (1)):
i. One Chairman as appointed by the Government;
ii. One Additional Secretary from any division of the Ministry of Finance as nominated by
the Government;
iii. One Additional Secretary as nominated by the Ministry of Commerce;
iv. One Deputy C&AG as nominated by C&AG of Bangladesh;
One Deputy Governor as nominated by the Governor of Bangladesh Bank;
vi. One member of NBR as nominated by the Chairman of the Board;
vii. One Commissioner of BSEC as nominated by the Chairman of the Commission;
viii. President of the lnstitute of Chartered Accountants of Bangladesh (ICAB);
ix. President of the lnstitute of Cost & Management Accountants of Bangladesh (ICMAB);
x. One professor of the Accounting Department from Public Universities as nominated by
the Government (For specific tenure)
xt President of the Federation of Bangladesh Chamber of Commerce & lndustries (FBCCI);
and
 Corporate Laws und Practices

xii. One Executive Director as nominated by the Chairman of the Council who will act as the
mem ber-secretary.
2. Chairman will be the Chief Executive of this Council. (Sec 5 (2))

4. Procedures for separation of any members of the Council

1.. The members as referred to in Sec 5 (ka, Ja, Jha, Ta, Tha) can be separated if he/she (Sec 5
(1))-
i.
ls unable to carry out the duty due to physical or mental incapacity or disclaim to carry
out the duty;
ii. ls unable to carry out the duty or disclaim to carry out the duty for the period of 3
months without valid reason;
iii. Become ineligible to be member as per the provision of Sec LL;
iv. Performs any work which is harmful for the Council;
v. Shows such behaviour or use his/her positions in such a way that hampers the objective
of this law or the public interest;
2. Government will formulate the investigation committee in order to justify the reasons as
per Sec 6(1) and the working procedures, scope, deadline for submission of report, the
required subject matters to be included in investigation report, recommendation for
removal and related matters shall be determined by rules. (Sec 6 (2))
3. Any removed member shall be ineligible to be the member of this Council or reappointed
for any position of the Council. (Sec 6 (3))

5. General objectives of the Council

General objectives of the Council shall be the followings (Sec 7)

1. Determination of financial reporting and auditing professional standards, ethical standards,

etc.;
2. Qualitative standard development of accounting and auditing services;
3. Development of accounting and auditing profession;
4. Confirmation of highest standards of the financial reporting and auditing works of the
scheduled auditors;
5. Enhancement of the credibility financial statements;
6. Ensuring the morality, transparency of professional works of financial reporting and auditing
and cooperation in capacity building; and
7. Encouraging Public lnterest entities to produce high quality report of financial and non-
financial information.

5. Powers and functions of the Council

1. The Council, for carrying out the functions of the Council fairly, can perform all necessary
powers and perform the functions, subject to the provisions of this Act. (Sec8(1))
2. The council may exert power on the following matters and also perform its functions
without prejudicing the spirit of subsection 1 above (Sec g(2)):

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 Corporate Laws and Practices

Considering the socio-economic situation of Bangladesh, formulating and implementing

standards keeping consistency with the lnternational Financial Reporting Standards and
Auditing Standards (Sec 8(2Ka));
Ensuring international standards adopted and quality standards complied by the lnstitute
of Chartered Accountants of Bangladesh (ICAB), lnternational Auditing and Assurance
Standards Board (IAASB) and other international organizations (Sec 8(2Kha));
Ensuring effective enforcement, monitoring and enforcement of financial reporting and
auditing standards made by the Council (Sec 8(2Ga));
iv Ensuring the necessary rules, regulations, standards guidelines, codes, formulation and
implementation of the financial report, accounting and quality certification (Sec

8(2Gha));
Monitoring practices and practice monitoring of auditors to maintain high standards of
professional behaviour (Sec 8(2Uma));
vi Advising on accounting and related activities and providing information services as
central information respiratory (Sec 8(2Ca));
vii Listing of auditors and recording and publishing of the related information (Sec 8(2Cha));
viii Ensuring compliance with the reporting requirements determined under any other laws
(Sec 8(2Ja));
tx.Providing recommendations and cooperation in the development and promotion of
education, training, internship, article-writing and research activities in the promotion of
education certificates, courses and professional standards run by professional
accountancy institutions (Sec 8(2Jha));
x. Monitoring of professional development activities conducted by the professional
accounting institution for the purpose of this Act (Sec 8(2io));
xi. Encouraging research on any topic that can be applied efficiently and, as the case may
be, financing financial reporting, accounting, audit, and corporate governance systems to
be more effective by the Council, Professional Accounting lnstitution or any related
organization (Sec 8(2ta));
xii Formulating the necessary rules or regulations in order to properly directing accounting
and audit activities (Sec 8(2tho));
xiii Conducting enquiries and activities related to this act (Sec 8(2da));
XIV Accepting and implementing the appropriate method or scheme for directing the
Council's objectives and activities (Sec 8(2dha));
XV Engaging with or, in the applicable case, the Memorandum of Understanding and the
Agreement with the initiatives taken by any organization whether local or international
which will be related to the functioning and the objective of the Council (Sec 8(2na));
xvi Determining the charges and fees for the service provided by the Council (Sec 8(2ta));
xvii lmposing fines under this Act and rules made thereunder Sec 8(2tha));
xviii providing recommendation or suggestion to the government regarding financial reports,
non-financial reports, financial statements, annual reports, accounts and audit or related
matters Sec 8(2da)); and
xix For carrying out the purposes of this Act, other functions which the Council may consider
necessary for the purpose of implementing the Council's general purpose and functions
Sec 8(2dha)).

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7. lncapacity of Executive Directors and Chairman

No person shall be eligible to be appointed or keep staying as Chairman or Executive Director of

the Council (Sec 1-3), if he-
t. is not a citizen of Bangladesh; or
2. is declared as bankrupt by the Competent Court; or
3. is declared to be a defaulter of loan by any bank or financial institution; or
4. is convicted of any criminal offense, the court gets sentenced to no less than 3 (three)years'
imprisonment; or
5. is unable to perform duties due to physical or mental illness; or
6. receives any financial benefits directly or indirectly from any matter under the jurisdictions
of Council; or
7. is involved in the accounting or audit functions as a professional accountant or as legal
counsel in his own name or in the name of other person directly or indirectly in exchange of
anything or without anything after being appointed; or
8. completes his 65 years of age; or
9. has been punished by a professional institution; or
10. has been punished for tax evasion.

8. Functional divisions of the Council

The functional division of the Council shall be composed of the following divisions in order to
fulfil the objective of this act (Sec 22(1.)):
L. Standards Setting Division;
2. Financial Reporting Monitoring Division;
3. Audit Practice Review Division; and
4. Enforcementdivision.

There shall be an executive director in each division referred to in sub-section (1) and he shall be
the head of that division (Sec 22(2)).

9. Responsibilities of Standard Setting Division

The functions of the Standard Setting Division shall be preparation of appropriate proposal for
formulation, renewal, development and acquisition of financial reporting, valuation, actuarial
standards, auditing standards, and to present it for the approval of the Council following the
provisions of this act (Sec 23(1)).
Without prejudicing the spirit of sub-section 1 of this act, in order to fulfil the objectives of this
Act, the Council may, by the previous sanction of the Government, make rules and procedures
for discharging the duties of the division of judges by making regulations, by notification in the
official Gazette (Sec 23(2)).
 Corporate Laws and Practices

10. Responsibilities of Financial Reporting Monitoring Division

t. The responsibilities of the Financial Reporting Monitoring Division shall be Monitoring,

analyzing and identifying whether financial reporting and auditing standards, codes or
guidelines made under this Act or any other law are being followed by the public interest
entities (Sec 2a(1)).

2. ln order to fulfil the objective of this Act, the Council shall, with the pre-approval of the
Government, by notification in the official gazette, determine regulations carrying out the
responsibilities in the field of Financial Reporting Monitoring Division (Sec 2 (2)).

3. ln order to carry out functions under this Act, this division shall inform in writing to the
relevant public interest entities or any other organization that if there is any objection to
any action taken by the Division, the company or organization can directly submit it to the
Financial Reporting Monitoring Division (Sec 2a(3)).

4. While performing the functions under this Act, it

appears to the Financial Reporting
Monitoring Division that if any financial reporting and auditing standards, codes or guideline
is not followed by the public interest entity, then the Division will take its opinion and
recommendation in relation to it in consideration in order to take action (Sec 2a(a)).

5, The Financial Reporting Monitoring Division shall perform its function in its own method in
compliance with this Act and the related provisions of this Act (Sec 24(5)).

11. Responsibilities of Audit Practice Review Division

1) The responsibilities of Audit Practice Review Division shall be as follows (Sec 25):
1. Monitoring activities related to the audit practice of the professional accountancy
organization;
2. For the purposes of this Act, revision of audit practice of any organization which assists the
scheduled auditor, audit firm or auditor on the basis of randomization;
3. Determining the non-compliance with the audit practice code under this act and auditing
standards by any organization which assists the scheduled auditor, audit firm or auditor;
4. Once every 3 (three) years -
i. Review the regulatory measures of the organization concerned;
ii. Review whether it has taken necessary steps for the development of an accountancy
profession by maintaining professional standards;
iii. Review whether it is carrying out the responsibility of protecting the public interest by
implementing the purpose of the other public interest described in its charter;

2) For the purpose of this Act, the Council may, by the prior approval of the Government, by
notification in the official Gazette, make rules and procedures for the discharge of duties of
the audit practice by making regulations.

526 1i),;g*
 Corporate Laws snd Practices

3) The Audit Practice Review Division will inform the concerned person or organization in
writing about the review report prepared by them, and if the person or organization has any
objection to the matter, then it may directly submit it to that Division.

4) lf any failure is found during the performance of this Act, the Audit Practice Review Division
will inform the department concerned for opinion and recommendations about the matter
and take appropriate action on the basis of opinion and recommendations received by the
division.

5) Subjectto the provisions of this Act and the rules made thereunder, the Audit Practice
Review Division shall perform its review in accordance with the procedure prescribed by it.

12. Functions of Enforcement Division

1. The main responsibility of the Enforcement Division shall be to consider any matter referred
to the Council directly by any other organization about any failure or violation of the
standards, recommendations or violations followed by other Divisions of the Council and the
rules made under any other law, and according to the investigation, if necessary, under this
Act, Possible punishment for violation or failure And make recommendations to the parties
concerned to inform it of taking actions (Sec 26(1)).

2. For the purpose of this Act, the Council may, by the pre-approval of the Government, by
notification in the official Gazette, make rules and procedures for discharging the functions
of the department, by making regulations (Sec 26(2)).

3. The Division, subject to this Act, shall not make any recommendation regarding taking
disciplinary action without providing the opportunity for reasonable hearing to the
concerned person or organlzation for the alleged violation or failure (Sec 26(3)).

13. Enlistment of Auditors

1'. Notwithstanding anything contained in any other law for the time being in force, after the
enactment of this Act, no auditor or any audit firm shall be eligible to be appointed as
auditor of any public interest company or not providing any services related to the audit
without enrolling with the Council (Sec 31(1)).

2. lf any enlisted auditor or any partner of any audit firm resigns or joins that firm, this shall be
notified to the Council in writing for the resignation or joining within 15 (fifteen) days (Sec
31(2)).

14. Application for enlistment of auditors

1,. For the purpose of enlistment under this Act, an auditor shall apply to the Council in terms
and conditions prescribed by rules (Sec 32(1)).
 Corporate Laws and Practices

2. The Council shall provide an enlistment certificate to the listed auditor under this Act, in
which the rules and regulations, guidelines, standards, or instructions made thereunder,
shall be mentioned in the rules applicable to the list (Sec 32(20.

3. Under this section, scrutiny of the applications for registration, fees, submissions, decision
to cancel or not, preserve printed and electronic copy of enrolment certificates, registration
of necessary information in general or in the e-register, deadline, informing the applicant,
auditor or audit firm name or any information included in the register or any other related
matters shall be governed by rules (Sec 32(3)).

15. Suspension or cancellation of enlistment certificate

is punished under section 48, the Council will discuss this matter in the
1,. lf any listed auditor
meeting as necessary and take one or more measures as follows (Sec 33 (1)):
i. lssue of warning notice to the enlisted auditor; or
ii. By issuing one or more conditions, ordering to submit the report regularly; or
iii. Suspension of its activities as a listed auditor for a term which shail not exceed two (two)
years; or
iv. The listed auditor will be given a reasonable opportunity to show reasons and to cancel
the enrolment by written order; or
v. The professional accountancy organization will be sent to take disciplinary action in
accordance with the relevant law against the listed auditor and which will inform the
Council about the arrangements made within the stipulated time; or
vi. The professional accountancy organization will take the relevant proceduret ;sr ihe
cancellation of the registration of the listed auditor under relevant law and infr:r;ri the
Council about the arrangements taken within the stipulated time.

2. At any stage of running the functions under this Act, if it appears to the Chairman or
Executive Director of the Council or any other officer of the Council, that any auditor has
committed an offense under sub-section (1"), then it shall be presented in writing in the
immediate subsequent meeting of the Council (Sec 33(2)).

3. lf the council thinks necessary for taking action under this section, then accordingly, it may
take further investigation, written or personal hearing, etc. in the prescribed manner (Sec
33(3).

4. lt will regularly update the website of the Council regarding the suspension or cancellation
of the enlistment certificate under this section (Sec 33(a)).

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 Corporate Luws and Pructices

16. Unapproved audit practice

1. Public interest entity shall not engage any person in the audit work, whose enlistment has
been postponed by the Council or cancelled the enlistment by the Council, or the action
taken by the Council on the recommendation of the Council, is pending by the professional
accounting institution (Sec 34(1)).
2. Without informing the Council about the following topics, an enlisted auditor may not
conduct audit in the name of any audit firm, namely (Sec 3a(2)):
i. ln case of partnership, the name of the firm's partners and the signatory's signature;
ii. To use the letter head of the audit firm, a copy thereof; and
iii. lf the name of the audit firm is similar to that of a regional or international network, or
the firm includes any regional or international network, orthe letter head of the firm or
any other document indicates that the firm is part of any regional or international
network, then that regional or international network Detailed descriptions with the
documentary evidence of the relationship;
3. Any enlisted auditor shall not sign any account, statement, report or any document
executed by any other auditor, unless he is satisfied with it and takes full responsibility for
the work done (Sec 34(3)).

17. Auditors' report and opinion

L. ln relation to the preparation of audit report on financial statements of any public interest
entity, the auditor shall give affidavit in the prescribed form by the regulation on the basis
that the report has been prepared in accordance with the applicable auditing standards and
the relevant provisions of this Act and any other law (Sec 35(1)).
2. Without following the auditing standards made by the Council under section 40, no enlisted
auditor will express any opinion in his report (Sec 35(2)).
3. ln the annual report of an organization, the directors of the concerned company or the
empowered officer expressed that the report has been prepared in compliance with the
corporate governance code or any other regulatory, systematic arrangements, in which the
auditor will specify whether it has made the report consistent with the conditions of that
code or regulatory arrangements (Sec 35(3)).

18. Serious Misconduct

1'. When conducting audit in public interest entity, if the listed auditor is satisfied with this or
there is reasonable ground to believe that serious irregularities have been committed in that
company, then he will, immediately (Sec 36(1)):
i. lnform the details descriptions of the irregularities in writing to the members of the
Board of directors of Public lnterest Entity and its officers; and
ii. Every person referred to in clause (ka) shall request the concerned Public lnterest Entity
for taking appropriate action, in relation to such irregularities, singly or jointly.

2. lf the concerned Public lnterest Entity does not take any action in respect of such
irregularities informed in writing under sub-section (L), then the enlisted auditor may, by
 Corporate Laws and Practices

the way, consider the matter as appropriate, and inform the Council, the Professional
Accounting lnstitution, the Controlling Agencies and so on and any other statutory body or
parliament established under the law or rules as per the requirement (Sec 36(2)).

19. lndependence of auditors while carrying out responsibilities

1. An enlisted auditor will perform his duties independently and he will not do any work
contrary to the audit practice code made by the Council or will not be involved in any such
activity as the enlisted auditor (Sec 37(1)).
2. The Council may review the specific procedures for providing necessary assistance and
information about the audit practices by the auditor enlisted by regulation (Sec 37(21)'

20. Standards setting, etc.

1. Council, to provide professional accounting services for public interest organizations (Sec

40(1))-
i. Financial Reporting Standards keeping consistency with the lnternational Accounting
Standard issued by the lnternational Accounting Standards Board IASB); and
ii. Will set and issue auditing standards keeping consistency with international auditing
standards and assurance and ethics declaration issued by the lnternational Auditing and
Assurance Standards Board.

2. The Council will issue the necessary guideline for successful implementation of the Auditing
Standards (Sec a0(2)).

3. Every enlisted auditor shall follow the rules, regulations, codes or guidelines prest-ribed
under this Act, including the minimum conditions specified in the auditing standarris by the
Council in respect of its professional duties (Sec a0(3))'

4. Notwithstanding anything contained in sub-section (1), the Council may make adjustments
to international good practice and make separate simplified financial reporting structures
and standards for small and medium enterprises (Sec aO(a)).

21. Auditing practice monitoring of the auditors of Public lnterest entities

The Council or any officer authorized in writing by it, may review the audit practice of an
enlisted auditor and, in this regard (Sec 46)-
i. lnspect, examine and collect all records, documents, annual balance sheet, cash or cash
deposited in the bank, deposit, repository or other property, etc. under the control or
possession of the concerned auditor or his partner, employee or any other person; and

ii. Seek or interrogate information or explanation from any partner, employee or associate
person

530lFeg*
 Corporate Laws and Practices

22. Obligations to follow financia! reporting and auditing standards

1.. lf it appears to the Council that any Public lnterest Entity has failed to follow any financial
reporting and auditing standards, code or guidelines made under this Act, or has severely
distorted the financial statements of the Public lnterest Entity, then the Council may warn
the Public lnterest Entity in this regard or in accordance with those standards, its financial
statements immediately for a change or correction may direct (Sec 47(lD.

2. lf any Public lnterest Entity is instructed under sub-section (1), within 30 (thirty) days of
receiving that order, the Public lnterest Entity will amend or alter its financial statement and
repatriate the financial statements prepared in the revised or modified form to the
concerned Government Department or authority (Sec 47(2)).

23. lnvestigation of the complaints

t. lf an enlisted auditor declines or fails to comply with any order or order of the Council given
under this Act, then the Council may impose the said auditor in the manner prescribed by
the rules and amounts as administrative fine (Sec 50(1)).

2. Penalties imposed under sub-section (1) shall be recoverable as Public Demands under
Public Demands Recovery Act, 1913 (Act No. ilt of 1913) (Sec 5O(2)).

24. Appeal against the decision of the Council

1. Subject to the other provisions of this Act, if any party is aggrieved against any decision
made by the Council, within 30 (thirty) days of being informed about the decision, the
aggrieved may appeal to the appeal Authority and other matters related to it may be
submitted to the Appeal authority (Sec 53(1)).
2. The decision of the appeal authority shall be final in the appeal filed under sub-section (1)
(sec s3(2)).

25. Appealauthority

L. For the hearing of an appeal under this Act, the government may, by notification in the
official gazette, establish an appeal authority and it shall be called the Accounting and Audit
Appeal Authority (Sec 5a(1)).
2. The appeal authority referred to in sub-section (1) shall be formed as follows, namely (Sec
s4(2D-
i. Any person or a retired secretary who has its working experience of minimum 20
(twenty) year, including graduate (Honors) degree in Management, Business
Administration, Accounting, Law, Finance and Banking, Management or Commerce or
Financial Management, who will also be its Chairman;
ii. A law expert with a minimum of 15 (fifteen) years of experience in law, profession or law,
including a degree (honors) in law; and

531 | P;r g t:
 Corporate Laws and Practices

iii. A minimum of 15 (fifteen) years of practical experience along with degree (honours) in
Economics, Business Administration, Accounting, Law, Finance and Banking,
Management or Commerce or Financial Management or professional degrees in
accounting.

3. The appeal authority will determine its procedures'

4. The appeal authority may prescribe or amend, alter or cancel any decision of the Council, or
postpone the interim order for suspension of the effectiveness of the decision.

5. Decisions will be taken based on the opinion of the majority of the appeal authority.

6. lf the decision is made against the appellant under the provisions of this section, the appeal
authority may make the decision to the appellant to bear all the costs related to the appeal.

7. All expenses of the appeal authority shall be executed in the manner prescribed by rules and
from the Council's fund.

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