Companies act needs fine-tuning

Some provisions in the companies act still require fine-tuning in order to improve the business climate in Bangladesh, according to speakers at a webinar held yesterday.

They also came up with a number of observations and recommendations on how to improve the country's ranking in the World Bank's ease of doing business index.

The webinar, styled "Ease of Doing Business: Perspective of Companies' Act," was organised by the Institute of Chartered Accountants of Bangladesh (ICAB).

Tapan Kanti Ghosh, secretary of the commerce ministry, was present as chief guest. 

In 2020, amendments were made to the Companies Act, 1994, but some provisions still need to be aligned with the best practices adopted in Singapore and Hong Kong, which ranked second and third respectively in the latest ease of doing business index.

So, local companies should prepare their financial statements as required by the Financial Reporting Council (FRC) in line with the International Financial Reporting Standards (IFRS), speakers said.

Besides, audits should be carried out as per the International Standards on Auditing (ISA) as approved by FRC since both international and local investors need to comply with IFRS and ISA regulations.

To ensure compliance, auditors should be paid as per the prescribed minimum audit fee fixed by the ICAB or higher if accepted by the company.

Speakers also stressed the need to digitise all functions of the Registrar of Joint Stock Companies and Firms (RJSC).

They then put forward some observations and recommendations for the Companies Act, 1994, that could not only improve the country's ease of doing business ranking, but also boost both foreign and domestic investment.

ICAB President Mahmudul Hasan Khusru said it is necessary to simplify and modernise the corporate laws to ensure a more business-friendly atmosphere.

"Although amendments to the Companies Act, 1994 have been made, the massive changes we had hoped for were not there," he added.

The ICAB chief went on to say that a balanced companies act would encourage both local and foreign investment.

Snehasish  Barua,  a partner at Snehasish Mahmud & Co, and Tanjib-ul Alam, an advocate of the appellate division of the Supreme Court, jointly presented the keynote paper.

Amendments brought to the companies act in 2020 allow foreign firms to fully own private limited enterprises in Bangladesh, giving them the opportunity to open companies in a short time.

A similar practice was adopted in Hong Kong.

Before 2020, a minimum of two persons were required to open a company in Bangladesh whereas under the new amendments, foreign entities can also open a PLC or OPC.

The merger and acquisition of companies should be done in two ways -- merger by adoption or merger by formation -- in line with the practices adopted in India and the UK.

However, no such provisions are present in Bangladesh's Companies Act, 1994, they pointed out, adding that it needs to be addressed soon.

Md Humayun Kabir, council member and former ICAB president, moderated the programme.

The panel included Jibon Krishna Saha Roy, director of the Bangladesh Investment Development Authority; AHM Ahsan, the in-charge of the registrar at RJSC; Nihad Kabir, president of the MCCI; M Masrur Reaz, chairman of the Policy Exchange of Bangladesh; and Mohammad Enamul Huque, managing director and head of corporate, commercial and institutional banking at Standard Chartered Bank.