Corporate Laws and Practices Practice Flashcards

Comprehensive vocabulary flashcards covering key definitions, thresholds, formulas, and legal doctrines from the lecture notes on Corporate Laws and Practices.

One Person Company (OPC)

A special type of company with only ONE shareholder who acts as the sole director, offering limited liability confined to the capital contributed.

OPC Paid-up Capital Thresholds

To remain an OPC, the paid-up capital must be between a minimum of $BDT\,25\,\text{Lakh}$ and a maximum of $BDT\,5\,\text{Crore}$.

OPC Annual Turnover Thresholds

The annual turnover for an OPC must stay between $BDT\,1\,\text{Crore}$ and $BDT\,50\,\text{Crore}$.

OPC Conversion Rule

A One Person Company must convert to a Private Limited Company only when BOTH the capital and turnover thresholds are breached.

Constructive Notice

A legal doctrine where outsiders are deemed to have knowledge of the company's Memorandum, Articles, and relevant laws.

Indoor Management

A doctrine allowing outsiders to assume that the company's internal procedures were followed correctly without needing to investigate internal workings.

Qualification Shares

The specific number of shares a director must acquire within $60\,\text{days}$ of their appointment to remain in office.

Director Vacancy (The "3s" Rule)

A director's office becomes vacant if they miss $3$ consecutive meetings without leave or fail to pay share calls within $6\,\text{months}$.

Managing Director Compensation Formula

Upon removal before term expiry, compensation is the lesser of the (remaining term salary OR $3\,\text{years}$ salary), calculated on the average of the last $3\,\text{years}$, provided there was no fraud or misconduct.

First AGM Timeline

The first Annual General Meeting must be held within $18\,\text{months}$ of the company's incorporation; failure to meet this specific deadline makes the meeting invalid.

Subsequent AGM Timeline

After the first, AGMs must be held every calendar year with a maximum gap of $15\,\text{months}$ between two meetings.

AGM Quorum Requirements

For Public companies, at least $5$ members must be personally present; for Private companies, the minimum is $2$ members.

RSC Rule for Dividends

A mnemonic for sources prohibited for dividend distribution: Revaluation Reserve, Share Premium Account, and Capital Reserve.

Salomon v Salomon (1897)

A landmark case establishing that a company is a separate legal person distinct from its shareholders, even if one person owns nearly all shares.

Lifting the Corporate Veil

The legal process where courts look behind the separate entity of the company at the real persons in control, usually triggered by fraud or improper conduct.

Book Building Method

An IPO method where the price is determined through bidding to find a cut-off price, with general investors receiving a $10\%$ discount on that price.

Price Sensitive Information (PSI) Disclosure

Listed companies must disclose PSI (e.g., mergers, dividends) within $30\,\text{minutes}$ of the board decision to the BSEC and stock exchanges.

Independent Director Requirement

Under the CGC 2018, minimum $\frac{1}{5}$ ($20\%\text{}$) of directors must be independent, with at least one female independent director on the board.

Public Interest Entity (PIE)

Entities with significant public accountability, including banks, insurers, or organizations with annual revenue exceeding $BDT\,50\,\text{Crore}$ or specific asset/employee thresholds.

Self-review Threat

An auditor independence threat occurring when an auditor audits their own work, such as providing tax or internal control advisory to the same client.

Share Money Deposit

Funds received for shares not yet issued; it is treated as potential share capital for EPS calculations and must be converted into capital within $6\,\text{months}$.

EPS Formula for Share Money Deposit

$$\text{EPS} = \frac{\text{Total Earnings}}{\text{Paid-up shares} + \text{Potential shares from share money deposit}}$$

Capital Adequacy Ratio (CAR)

A measure of a bank's capital strength, calculated as $\text{CAR} = \frac{\text{Tier-1 Capital} + \text{Tier-2 Capital}}{\text{Risk-Weighted Assets (RWA)}} \times 100$, with a minimum requirement of $12.5\%\text{}$.

Willful Defaulter

A borrower who has the financial ability but refuses to pay, provides false information, uses a loan for an unintended purpose, or transfers security without permission.

Statutory Reserve Transfer (Banks)

Banks must transfer at least $20\%\text{}$ of distributable profit to the statutory reserve each year if the (reserve + share premium) is less than the paid-up capital.

Solvency Ratio (Insurance)

The ratio of Adjusted Available Solvency Margin to Net Liabilities; the minimum required ratio is $1.0$.

Inadmissible Assets (Insurance)

Assets excluded from Solvency Margin calculations, including unpaid premiums overdue by more than $90\,\text{days}$ and agent receivables overdue by more than $6\,\text{months}$.

Annual Leave Encashment

Workers can encash up to a maximum of $50\%\text{}$ of their annual leave entitlement once per year, excluding overtime and bonuses from the wage calculation.

Maternity Benefit Formula

Benefit = $(\frac{\text{Last drawn monthly salary}}{26}) \times 112\,\text{days}$, provided the worker has $6\,\text{months}$ of service and fewer than $2$ surviving children.

Workers' Profit Participation Fund (WPPF) Split

A mandatory $5\%\text{}$ of pre-tax profit allocated as follows: $80\%\text{}$ to WPPF, $10\%\text{}$ to the Workers' Welfare Fund, and $10\%\text{}$ to the Bangladesh Workers' Welfare Foundation Fund.