The Financial Express

Hassles businesses face: The buck stops with RJSC

Evaly and Fianancial Express Evaly and Fianancial Express
Hassles businesses face: The buck stops with RJSC

The Registrar of Joint Stock Companies and Firms (RJSC) is one of key authorities that facilitates formation of a company and keeps track of all ownership-related issues following Companies Act 1913 amended in 1994. The act in Bangladesh is age-old and has undergone a number of changes in order to support the private sector but has yet to meet present needs of businesses.

RJSC has been undergoing a series of reforms for long and is supposed to become by this time a fully automated service provider to meet primary requirements for starting a company. Automated services are not functionally available; any client has to submit both soft and hard copies of important documents for getting services from the RJSC.

Currently, there are a total 235,545 entities registered under the RJSC and among them, number of public companies is 3,496, private companies 167,802, foreign companies 887, partnership firms 47,525, trade organisations 1,102 and number of societies is 14,733. In the past, it was difficult to get this basic information of registered companies but now updated information is available on the website. RJSC is a unique example of having updated information of companies and similar practice needs to be introduced in other similar offices such as CCI&E, offices that provide trade licenses etc.

The organisation's website gives a clear vision which is to upgrade activities of company registration and post registration return filing to international standard. Its mission is to make an office paperless and ensure its contribution to development process by making online service simple, modern and business friendly.

The RJSC citizen charter says it provides 16 types of different services to its clients. The services are name clearance, registration of company, society, trade organisation, partnership firm etc., returns filing by stakeholders, share transfer through online, recording og submitted returns file after examination, recording change in board of directors, recording share transfer, recording share allotment, issuance of certificate with digital signature, accepting and resolving miscellaneous application, submission of mortgage documents (manually), issuance of certified copies, issuance of certified copies of mortgage, monitoring the status of submitted returns filing, removing name of nonfunctioning companies from register book, recording return filing of wound up companies.

Income of RJSC from its service has increased in the last few years, it was Tk 10.90 billion 2014-15 but rose to Tk 15.27 billion in 2015-16, Tk 21.21 billion in 2016-17 and to Tk 23.80 billion in 2017-18. And the earning of the office stood at was k 40.40 billion in 2018-19.

All updated information is now available on the RJSC website. However, it needs improvement and services like opening a new company, winding up, transfer of shares and addressing other company-related issues should be instant.

Entrepreneurs face some hassles while transferring shares to relative/s as RJSC often asks for 'no objection' from other directors/members. If relevant forms are filled up properly, no other document is supposed to be asked by the RJSC. Company or individual) who is not a member of the previous company or a relative of the company director also faces the same problem. The Companies Act mentions that 15 days' notice is required to inform the existing shareholders and if no member responds to it after 15 days, it can be sold outside existing members.

'No objection statement' from existing members  is actually not required by law. Such statement is compulsory only when notice time is less than 15 days. A shareholder, who is reluctant, usually will not be positive in providing such letter. If existing shareholder does not provide such statement, the whole process gets stuck up. As share transfer issues is common and required by the companies, the entire process and list  of documents and specimen copies of such documents would  need to be uploaded in the website of RJSC for better clarification so that entrepreneurs are not harassed in this respect.

The citizens' charter of RJSC says it requires 7-30 days to get the service on transfer of share and the mode of providing this service is online. No fee is applicable to get this service. But it takes longer time in most of cases; documents are needed to be submitted repeatedly and the services are not fully online.

As there is no defined standard operating procedure (SOP) to provide these services, entrepreneurs do not understand the way to proceed and fall into bureaucratic problems. After submission of hard copies of documents by the applicant, the RJSC sometimes takes long time to add this information to the users account of the company as well as to its website. If these processes meet requirements, the ranking of ease of doing business will increase further in the coming years.

Additional process, though not specified by any, is also followed; for example, members of the Board of Directors have to put finger print (thumbprint sign) on the documents to transfer share. There may not be any mention of such process in the policy.

To have services of the RJSC, companies appoint professional lawyers who allegedly hire unofficial agent/s of the RJSC to get the desired services. Such practice strain relations with the members of the Board and it increases costs and time leading to financial losses.

If a company wants to raise authorised capital and some shareholders want to buy shares and some remain reluctant, RJSC claims that there is a requirement of "no objection" from those shareholders who are not interested in buying shares. In the Companies Act, it is clearly mentioned that if no response comes from existing shareholder/s within 15 days, the company can offer share/s to those who is/are interested and even to external parties.

Forfeiture of shares of ex-director of a company is also difficult. A company is registered first and then share is allocated against each shareholder, considering that the members agree to purchase respective number of shares. Before registration of the company, it is unusual to have scope of opening a bank account under the company name. Shareholders/members pay the money of the share after opening bank account. Certain portion of shares may be paid as preregistration expenses or by some other asset contribution. Condition or ability to pay may change because of different situation. If a member does not pay the required amount against the unpaid share and/or if expresses his/her unwillingness or inability to pay, this share can be forfeited, provided rhe board of director agree.

Due to conflict of interest or any other reasons, a director may take steps to forfeit his/her shares. Such decision is taken in an extraordinary general meeting (EGM) of the company. RJSC demands presence of ex-director/s (whose share/s is/are gone for forfeiture) while giving approval of forfeiture of shares. At times, the ex-director may not be interested to ensure his/her presence at the RJSC. The process of exit of any director needs to be clear.

To hand over power of attorney to another person, a director is compelled to reach RJSC physically at a specific date and specific time. But, he may be out of the station in that time. This process charges costs and time. Rule of handover of 'power of attorney' needs to be simplified.

Company may want to send documents to board members online through listed e-mail IDs (personal and official). But in many cases RJSC ignored e-mail communication and instead asked the applicant to to send such documents to board members by registered post. RJSC could  consider e-mail as a valid mode of communication as documents are sent to the listed e-mail IDs (personal and official) of the board members, that have already been submitted to RJSC.

Services offered by the office are provided by its appointed officers on alphabetic order of company names. Lack of random distribution of files creates problems in the queue. Service should be provided on the basis of random file distribution instead of alphabetic order.

Valuation of intellectual experience and intelligence of a person need to be considered and calculated properly to evaluate these rare qualities, professional experience if borrowed/hired by a company for better performance of the firm, their capacity to contribute to companies should be valued properly and should not be treated only in monetary terms.

Prototype of required documents as per RJSC preferred format is not available always and therefore officials often ask for amendment to resolutions and notices and the customer faces lots of trouble. It is a common objection that even after amendments to the previous document as per RJSC officials; advice, they give new correction. It is not uncommon that the same document needed correction more than three times.

Once someone is advised to change document, such advice should be given in writing or through email. If the mistakes are notable in the document and/or not well covered whatsoever the reason, the RJSC representatives/officials should inform the applicant in writing and/or via email why that correction is required and/or why the document is not well covered.

For online submission of any application/matter, relevant director/s or shareholders where applicable can receive notification (e.g. auto email) as soon as such online submission is made. For manual submission, the office will send relevant documents to respective directors or members where applicable. It is true that companies serves interest of many people and the government office is the most capable monitoring body,  but it would also be taken into consideration that because of delay and bureaucracy, business should not be hampered and companies should not be in trouble.

Ferdaus Ara Begum is CEO at BUILD, a public-private dialogue platform supported by DCCI, MCCI and CCCI

[email protected]

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