Incorporate a Public Limited Company

Public limited company: There is no specific definition in the Companies Act, 1994 as to the definition of public limited company. The Companies Act, 1994 Provides, “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.

Observing the definition given in our Companies Act, 1994, it is clear that a company which is not private company is public company. In a public company, the characteristics of a private company shall not be present.

Pre-Incorporation Requirements for a Public Limited Company in Bangladesh:

Before beginning the process of incorporating a Public Limited Company (PLC) in Bangladesh, several pre-incorporation requirements must be met to ensure compliance with the regulations set forth by the Registrar of Joint Stock Companies and Firms (RJSC).

Firstly, a PLC must have a minimum of three directors. This requirement ensures that the company is managed by a group of individuals rather than a single person, promoting a broader range of expertise and decision-making perspectives. In addition to the directors, a PLC must have at least seven shareholders. This stipulation distinguishes public companies from private ones and reflects the company’s intention to seek investment from a wider public audience.

Another critical aspect of pre-incorporation preparation is determining the company’s share capital. While there is no legally mandated minimum share capital requirement in Bangladesh, it is important to ensure that the company has sufficient capital to support its initial business activities and operational costs. Adequate capital will not only support the company’s growth but also boost investor confidence.

Lastly, choosing a unique and appropriate name for the company is essential. The proposed company name must not be identical to or too similar to the name of any existing company in Bangladesh. This helps to avoid confusion among the public and ensures a distinct corporate identity. To verify name availability and uniqueness, the company must apply for name clearance through the RJSC’s online system. Upon approval, the name clearance certificate will be issued, which is valid for six months, during which the incorporation process should be completed.

Procedure for incorporating a public limited company: Here’s a detailed about how to register a Public Limited company in Bangladesh.

1. NAME CLEARANCE

   To set up a business in Bangladesh, your first step would be to acquire a name clearance for the business name you are proposing. Visit www.roc.gov.bd and first generate a username. Then you can apply for the clearance of your name. You will obtain a bank payment slip after you have submitted the name clearance request and you will have to pay Taka 600 to the specified bank. You’ll need to sign in to your account on the RJSC website after making the deposit and then you’ll get the name clearance.

2. Drafting the Memorandum and Articles of Association

   It is of vital importance to draft a solid and consolidated constitution document of the company. The Memorandum of the Company should state the primary business objectives, the amount of paid-up capital & authorized capital, and state the list of the shareholders along with their respective shareholdings. It is to be noted here Bangladesh does not allow a One Person Company (OPC) and a minimum of two (2) shareholders are required to set up a private limited company. However, in the case of a public limited company, the total number of shareholders required is seven (7). Recently the government has also allowed the opening of one-person companies and you can browse through our article on the subject. The Articles of Association of the Company should include the list & number of the directors, power of the board, power of the Managing Director, meeting process, quorum, notice procedure, appointment of auditors etc. The minimum number of directors for private ltd company is two (2) for public ltd company is three (3). Directors are required to hold a minimum one share (qualification share) in the Company; however, the qualification share requirement is relaxed in case Directors who are nominees of corporate entity shareholders. Also, it is possible to appoint Independent Directors.

3. Opening Temporary Bank

   Once name clearance is obtained, a temporary bank account is required to be opened by the proposed company. Along with the name clearance documents, a copy of the Draft Memorandum and Articles of Association needs to be submitted to the respective Banks. Bank accounts can be opened remotely.

4. Submission of Digital Documents

   Upon receipt of the encashment certificate, the Promoters are required to upload a digital copy of the Memorandum & Articles, Directors Consent Forms to the RJSC server. On submission of the documents in the RJSC server, an Electronic Payment Slip will be printed and equivalent amounts need to be submitted to designated bank accounts of RJSC.

5. Submission of Physical Documents

   Upon payment of fees to the designated bank account for governmental fees and charges as stipulated in the Electronic Payment Slip, a nonjudicial stamp needs to be affixed in the Memorandum and Articles of Association and the same need to be submitted to RJSC along with Directors Consent Form (Form IX), List of Consenting Directors ( Firm X), List of Directors and Managing Agents (Form XII); Original copy of the Encashment Certificate and Name Clearance Document and payment slip acknowledged by the Bank.

6. Obtaining Incorporation Certificate and other Documents

   Within 3-4 working days from submission, the Company will receive Incorporation Certificate, Digital Certified Copy of the Memorandum & Articles of Association and List of Directors (Form XII). Once a company receives the Certificates, a copy needs to be furnished to the Bank to convert the temporary account to regular account.

7. Additional Compliance for Listed Companies: Additional rules and regulations as stipulated by the BSEC for listed companies.

8. Drafting the Prospectus: One of the initial steps in establishing a Public Limited Company is drafting the prospectus. The prospectus serves as a vital document that provides potential investors with essential information about the company, its operations, and the securities being offered. It plays a crucial role in attracting investors and is subject to strict regulatory scrutiny.

9. Sanctioning of Capital from the SEC: Before moving forward, it is necessary to obtain sanction for the company’s capital from the Securities and Exchange Commission (SEC) of Bangladesh. The capital structure must adhere to the guidelines and regulations set forth by the SEC, ensuring transparency and investor protection.

10. Approval of Capital from SEC: After obtaining the sanction, the next step involves securing the approval of the company’s capital from the SEC. This approval is a crucial aspect of the company’s registration and financial planning. It helps ensure that the capital structure is in accordance with regulatory standards.

11. Filing the Prospectus with the RJSC: Once the prospectus is drafted and approved by the SEC, it must be filed with the Registrar of Joint Stock Companies and Firms (RJSC). The RJSC plays a pivotal role in the registration process and maintains the official record of companies operating in Bangladesh.

12. Underwriting Agreement with Underwriters: Underwriters play a significant role in the initial public offering (IPO) process of a Public Limited Company. An underwriting agreement is essential to determine the terms and conditions under which underwriters will purchase and resell the company’s shares to the public.

13. Arrangement of Bankers and Bankers to the Issue: Selecting bankers and bankers to the issue is another vital step in the process. Bankers play a crucial role in managing the financial transactions related to the issuance of shares and the capital raising process.

14. Listing with Stock Exchanges: Public Limited Companies often seek to have their shares listed on stock exchanges. This step offers shareholders liquidity and the ability to trade their shares. Ensuring compliance with stock exchange listing requirements is paramount.

15. Publication of Prospectus: The prospectus, after approval, must be published as per regulatory requirements. This publication serves as a means of informing potential investors about the company and the securities being offered for subscription.

16. Data Entry and Summation of Applications: Managing applications from potential investors involves efficient data entry and summation. This step is essential for tracking and managing the subscription process.

17. Board Meeting for Allotment Consideration: The company’s board of directors convenes to consider the allotment of shares. Allotment decisions are made based on regulatory guidelines and the subscriptions received.

18. Allotment under SEC Guidelines: The SEC provides guidelines for the allotment of shares, ensuring a fair and transparent process. Compliance with these guidelines is critical to maintaining investor trust and regulatory compliance.

19. Refund of Excess Subscription: In the event of excess subscription, a mechanism for refunding the excess amounts to investors is essential. This ensures a fair and transparent process, and the company must have clear procedures for handling such situations.

20. Submission of Return of Allotment with RJSC: The company is required to submit a return of allotment to the RJSC, detailing the allocation of shares to investors. This document is crucial for maintaining official records and regulatory compliance.

21. Issuance of Share Certificates: Share certificates must be issued to shareholders within the specified timeline. These certificates serve as legal evidence of ownership and are an essential part of the investor’s portfolio.