Course: BUS 518 (Business Law & Ethics)

Submitted by:
ID:
Sections: 01
Fall 2022
Master Program
School of Business & Economics

Date of Submission: 21/12/2022

Submitted to: Dr. Ishtiaque Ahmed

Associate Professor of Law
Board of Directors:

The board of directors is a group of individuals elected by the shareholders of a company to

represent their interests and to oversee the management of the company. The board of directors is
responsible for setting the overall strategic direction of the company, evaluating the performance
of the management team, and making major decisions such as appointing or removing
executives, approving major transactions such as mergers and acquisitions, and setting the
compensation of the company’s executives. The board of directors is responsible for ensuring
that the company is being run in a way that is in the best interests of the shareholders, and it has
the power to hold the management team accountable for their actions and decisions. They set up
the company’s policies and procedures and ensure that the company is compliant with all
relevant laws and regulations.

Qualifications:

The qualifications for the board of directors of a company are typically set out in the company’s
article of association or bylaws, which are the internal governing documents of the company.
The qualifications for the board of directors of a company in India and Bangladesh are generally
similar in that both countries require directors to be natural persons who are of sound mind and
not disqualified from being a director under the respective company acts.

Both India and Bangladesh also have provisions relating to the minimum number of directors
that a company must have, and these directors must meet certain qualifications in order to be
eligible for appointment. For example, the company should have a minimum of 3 directors for
public companies and at least 2 directors for private companies. The maximum number of
directors the company may have is fifteen. The minimum requirement of age should be 18 and
above. The directors need to sign the memorandum for a number of shares not less than the
minimum number of qualification shares, 15 days of notice needs to be given for participation
for the board of directors. Consent letter must be signed for applying as the board of director, and
it must be given to the company before or within 30 days. The subscribers of the memorandum
shall be deemed to be the directors of the company until the first director are appointed.
Overall, it appears that the qualifications for the board of directors of a company in India and
Bangladesh are quiet similar, with both countries imposing certain restrictions on who can be
appointed as a director based on factors such as insolvency, criminal conviction and mental
capacity, though the India ACT,2013 has a clause that the residence of a director in India must
have a total period of not less than 182 days in their previous year when applying for the
position.

Duties:

The duties of the board of the directors in India and Bangladesh according to Company ACT
2013 and Company ACT 1994 are generally similar regardless of the country in which the
company is incorporated, they are responsible for the overall management and direction of the
company. However, there may be some provisions in the laws of India and Bangladesh that
outline the duties of the board of directors in those countries.

The duties include:

 Ensuring that the company’s affairs are managed in accordance with the provisions of the
ACT and the articles of association of the company.
 Ensuring that the company complies with all applicable laws and regulations, including
governance regulations.
 Making decisions on major business matters, including mergers, acquisitions, and other
strategic transactions.
 Appointing, supervising, and removing the company’s senior management team,
including the CEO and other key executives.
 Reviewing the performance of the company and its subsidiaries and affiliates.
 Setting the company’s strategic goals and objectives and ensuring that the company has
the resources and capabilities to achieve them.
 Overseeing the financial performance, including the preparation of financial statements
and the management of financial risks of the company, and are prepared in accordance
with the ACT and generally accepted accounting principles.
 Providing guidance and oversight to the management team running the company.
  Protecting the interests of shareholders and stakeholders, including by ensuring that the
company’s actions are transparent and accountable.
 Appointing and removing the company’s auditor.
 Determining the remuneration of the company’s directors and the key managerial
personnel.
 The board of directors must act with due and reasonable care, skill, and diligence.
 The board of directors are the policy makers and has power over management.

However, the Bangladesh Company ACT 1994 has a clause that states that once in every 3
months at least 4 such meeting shall be held in every year.

Restrictions:

There are sever similarities in the restrictions on the board of directors under the Bangladesh
Company ACT 1994 and Indian Company ACT 2013. Both countries have provisions in the
company laws that regulate the powers and responsibilities of the board the directors, as well as
the qualifications and disqualifications of directors.

However, certain restrictions of the board of directors includes the following:

 The board of directors cannot exercise any power that is specifically reserved for the
general meeting of shareholders.
 The board of directors cannot exercise any power that is prohibited by the article of
association of the company.
 They cannot exercise any power that is contrary to any law or the company’s
memorandum of association.
 They must pay the face value of the shares within 6 months of notice.
 They cannot exercise any power that is likely to cause the company to be wound up or to
be placed in a position of insolvency.
 They cannot exercise any power that is likely to cause the company to be in breach of its
corporate social responsibilities.
 The board of directors must exercise its power in good faith and in the best interests of
the company.
 The board of directors must disclose any potential or actual conflict of interest before or
at the sign of memorandum.
 They cannot issue shares or debentures without the prior approval of the shareholders.
 They cannot borrow money more than the company’s paid-up capital and free reserves
unless the borrowing is specifically authorized by the shareholders.
 The board of directors cannot sell, mortgage, or lease any of the company’s assets
without the prior approval of the shareholders, unless the sale, mortgage or lease is in the
ordinary course of the business.
 They cannot make any loans to directors or other officers of the company without the
prior approval of the shareholders.
 They cannot pay any commission to the directors or other officers of the company unless
the commission is specifically authorized by the shareholders.
 The board of directors has not paid any calls in respect of any shares of the company held
by him weather alone or jointly with others and six months have elapsed from the last day
fixed for the payment of the call.
 The board of directors may be disqualified from serving on the board if they have been
found to have engaged in misconduct.
 They would be disqualified if they are engaged in criminal convictions less than 6
months, if more then they would be able to apply for the position after 5 years. If the
conviction is of 7 years, then they would be completely out.
 They are prohibited from engaging in conflicts of interest, such as using their power as a
director to obtain a personal benefit or advantage.
 The directors must not be in any fraudulence where they did not pay taxes, or proper
amount of the dividends to the shareholders.
 The board of director would be liable for any untrue statements given at the beginning of
the position.
 They would be liable for negligence of their duties and therefore the company suffers
damage.
Though the majority of the restrictions on both the company ACTs are similar, there are slight
differences in few of them, for example according to the Indian Company ACT, 2013, it is
restricted that the director is absent himself from all the meeting from the board of directors held
during a period of 12 months with or without seeking leave of absence of the board. Whereas,
according to the Bangladesh Company ACT, 1994, it is restricted to absent himself from 3
consecutive meetings of the directors or from all meetings of the directors for a continuous of 3
months, whichever is the longer, without leave of absence from the board of directors. As for
independent directors there are no direct requirement for Bangladesh Company ACT, whereas
for Indian Company ACT, one third of the board of directors need to be independent directors.
The maximum number of appointed term of years for Bangladesh Company ACT is of 5 years,
for Indian Company ACT, it is 3, however there is a chance of reappointment with additional
terms.

In conclusion, the restrictions on the board of directors are in place to ensure that they act in the
best interests of the company and its shareholders, also maintain the integrity, disclose any
conflicts of interest, and comply with all relevant laws and regulations. These restrictions are
necessary to protect and ensure that the board is acting responsibly, transparent, diligence, ethical
and in accordance with the law. The board must act within the powers granted to it under the
company’s article of association and must not exceed its authority.

Reference:

Article: Indian Companies ACT 2013: The Story So Far

Website: Bryan Cave Bulletin
URL: https://www.bclplaw.com/a/web/2031/Bryan-Cave-Bulletin-Indian-Companies-Act-2013-
The-Story-So-Far-O.pdf

Article: THE COMPANIES ACT 2013

Website: Unacademy
URL: https://unacademy.com/content/ca-foundation/study-material/business-laws/the-
companies-act-2013/

Article: A Brief Description of Company Directors from a Historical and the Legal Perspective
of Bangladesh
Website: The Network for International Law Students Bangladesh
URL: https://nilsbangladesh.org/a-brief-description-of-company-directors-from-a-historical-and-
the-legal-perspective-of-bangladesh/

Article: Highlights of Bangladesh Companies (Amendment) ACT

Website: The Legal 500
URL: https://www.legal500.com/developments/thought-leadership/highlights-of-bangladesh-
companies-amendment-act-2020/