On Mithun Knitting and Dyeing (CEPZ) Ltd a leading and emerging at first stages textile
Executive Summary This Report focuses specially on the role of company secretary’s functions such as (i) statutory duties (ii) duties to the directors (iii) duties to the full time managerial authority (iv) duties to the shareholders and the public (v) duties towards the office and the staff (vi) other duties and responsibility. Besides the above, report has covered three parts. (a) I:-Corporate governance / Secretarial practice, (b) II:- Corporate finance, Investment & taxation and (c) III: - Human resources management and administration. Part discussed about the issue of corporate governance practice in Bangladesh, benefits and limitations. It also has covered corporate governance guideline issued by SEC under order no.SEC/CMRRCD/2006158/Admin/02-08 dated the 20th February, 2006. Besides the above, it has discussed about the procedures of director’s appointment, retirement, board meeting, and notice. b) –II has discussed about the corporate finance that means overall finance procedures. Total finance is coming from export proceeds. Without export, MKDL utilize the bank loan facilities for meeting up emergency requirement. This part has covered also about the accounting procedures, vouching systems that are direct related to the corporate finance. Final section is c) –III, has discussed about the HRM and administration. This part has focused on the HRM procedures and administration of MKDL.
Part One Introduction 1.1
Origin of the Report:
The Internship program of ICSMB helps to the qualified students to familiarize with the corporate environment. For completing internship program prepared report on Mithun Knitting and Dyeing (CEPZ) Ltd a leading and emerging at first stages textile unit on its three major area-1. Corporate Governance/Company Secretarial Practice 2.Corporate Finance, Investment & Taxation and 3.Human Resource Management & Administration Specified by ICSMB.
1.2
Objective of the Study:
Major Objectives: To fulfill the partial requirement of course. •
To gather operational knowledge of company’s secretarial matters, finance & accounts and human resource management functions.
•
To familiarize myself with the practical aspects of the respective areas.
•
To sort out problems with effective solutions.
Specific Objectives: •
To analyze the existing structure of Mithun Knitting and Dyeing ( CEPZ ) Ltd Secretarial matters finance & accounts and human resource management functions.
•
To learn about Company Law, Corporate Law & Listing Regulation etc.
•
To make recommendation in acceleration the practice regarding.
1.3 •
Coverage of the Study: The study mainly covers Corporate Governance/Secretarial Matters, Finance & Accounts functions, Investment, Taxation and Human Resource Management functions of Mithun Knitting and Dyeing ( CEPZ ) Ltd
1.4
Methodology of the Study:
The report has been written on the basis of both primary and secondary sources. These sources are explained in brief below chronologically:
Primary Source: •
The primary source of data contains information provided by the Company Secretariat, the Board Secretariat, the top management, higher executives and officials of different levels of Mithun Knitting and Dyeing ( CEPZ ) Ltd
Secondary Source: Secondary data is collected from various publications and periodicals like•
Annual Reports
•
Company Brochures
•
Memorandum of Association of MKDL
•
Articles of Association of MKDL
•
Journals
•
Company operations.
Scope of the Study:
1.5
While preparing the report great opportunity to have real life knowledge about the major three areas1. Corporate Governance/Secretarial Matters, 2. Finance & Accounts functions, Investment, Taxation and •
3. Human Resource management functions of Mithun Knitting and Dyeing (CEPZ) Ltd . This report covers the functions done in the corporate secretariat, FAD (Finance & Accounts Division) and HRD (Human Resources Division) of Mithun Knitting and Dyeing ( CEPZ ) Ltd . I have tried my best to present my report through a detail analysis using various data, graphs, tables, accounting tools and references etc.
1.6 Limitations of the Study: The problems, which I faced during my internship period, are enumerated below: •
I am working in senior position in Masafi Group and side by side is studding in EMBA (DU). As a result time constraint is major obstacle to prepare the report properly.
•
The time frame of internship is three months which is really short to fulfill the study on three major areas.
•
Although all the concern officials of Mithun Knitting and Dyeing ( CEPZ ) Ltd
Provided valuable information but most of the time suffered a lot to collect information due to their busy activities.
1.07 Conclusion: In the above stated limitations have tried best to put forward my sincere and honest efforts to overcome those limitations and present a needful internship report
Part Two OVERVIEW OF THE COMPANY
• 2.01 Background of Mithun Knitting and Dyeing ( CEPZ ) Ltd .Mithun Knitting and Dyeing (CEPZ) Ltd is country’s leading Knit composite unit which located in CEPZ. Company’s year of incorporation was 1991 as a Private Ltd company as per companies act 1913 and commercial operation was started in September, 1993. It had gone IPO and converted as a Public Ltd company changing its status. It was listed with DSE & CSE in June 1994 and 2001 respectively. It was enlisted as a member of CDBL in 2006. REGISTERED OFFICE Post office para, Chuadanga CORPORATE OFFICE South Avenue Tower (6th floor), House # 50, Road # 07, Gulshan Avenue, Dhaka -1212 Tel: 8829458,8828948,8828832 LOCATION OF FACTORY Plot no. 44-46, Sector -4, Chittagong Export Processing Zone. Bangladesh. YEAR OF INCORPORATION 1991 COMMERCIAL OPERATION September, 1993
BUSINESS Circular Knitting, Dyeing, Finishing and Knit Garments. PRODUCT RANGE Single jersey, Interlock, Rib, French Terry, Flat Knit, Collar & Culf, Rib with Lycra etc and knit Garments of all sorts. CAPACITY 5.70 MT Fabrics and 5,000 pcs Garments per day. AUTHORISED CAPITAL Tk 100,000,000 LEGAL FORM OF COMPANY Public Limited Company LISTING WITH STOCK EXCHANGES Listed with Dhaka Stock Exchange in June, 1994 Listed with Chittagong Stock Exchange in June, 2001 NO OF SHAREHOLDERS 969 ( As on June 30, 2007 ) MARKETING CHANNEL Mostly through local garments manufacturing unit against local back to back LC and direct overseas export. NO OF EMPLOYMENT Officer and staff 90, Floor level workers 408, total 498. ORIGIN OF MACHINERY Italy, Sweden, Korea, China, Singapore, Hong Kong, Japan.
CORPORATE DIRECTORY BOARD OF DIRECTOR Rabeya khatun, Chairman Md. Mozammel Haque, Managing Director Md, Rabiul Haque, Director Md. Rafiqul Haque , Director Md. Mahabub – Ul – Haque, Director Md.Atiqul Haque, Director Salim Raza, Independent Director COMPANY SECRETARY S.M Shahidul Arefin AUDITORS KM Alam & Co. Chartered Accountants 80, Motijheel C/A, 4th Floor Dhaka – 1000. BANKERS Basic Bank Ltd Shantinagar Branch 14, Kakrail, Dhaka.
PHILOSOPHY •
Business is and always has been a dynamic and diversification process. Company strive to be at the fore front of change in Fashion and trend setting while in continuous pursuit of quality and commitments through total customer focus in all operational area.
•
Products are being best of available quality. Products for premium market segments integrate diversification / product range expansion.
•
Care for value of money.
•
Faith in individual potential and respect for human values.
•
Encouraging innovation for constant improvements to achieve excellence in all functional areas.
•
Striving for technological development and research for quality product and better packing.
•
Accepting changes as a way of life.
•
Strict adherence to financial and administrative principles.
•
To be the market leader in product range and market segment.
•
To provide our customers with products of latest technology.
•
To develop the employees to achieve real potential.
•
To provide shareholders with steady asset growth and return on investment above Industry norm
•
To grow revenue and profit at a rate above the Industry norm.
That is why company has based on production and marketing philosophy on three basic principles – Stability, Quality and Efficiency.
QUALITY POLICY Mithun Knitting and Dyeing (CEPZ) Ltd (MKDL) is committed to manufacturing, delivering & servicing of high quality fabrics to its customers. The objective of MKDL is to continuously improve its products and services to better satisfy the needs of its customers. All employees of MKDL are expected to conform to this Corporate Quality Policy and to understand the Quality needs to customers. The management is committed to supply all resources and logistic to attain the Corporate Quality Policy.
Vision: Stability, Quality and Efficiency of products which will ultimately maximize the company’s wealth. Mission:
mission is to continuous improving the quality of products for export market by
providing comforts and conveniences at affordable prices. Consumers: Company lives up to the expectations of a responsible organization by contributing to the improvement in the quality of life of our customers through outstanding products and services. Employees: Company respects each other as individual and encourage cross functional teamwork while providing opportunities for career development. Shareholders: Company provides a responsible return to shareholders while safeguarding investment. Suppliers: Company develops suppliers to partners in progress and share. Competitors: Company respects competitors and recognizes contribution to market value. Community: Company conducts business by conforming to the ethics of country and share the social responsibility of the less fortune. Corporate Focus: Vision, mission and objective/philosophy are to emphasize on the quality of product, process and services leading to growth of the company imbibed with good governance practice. Corporate Governance: Corporate Governance is now an emerging issue in Bangladesh. There is a tendency for boards to focus more on compliance than performance in order to cover legal, regulatory and other risks. The directors believe that an appropriate balance should be maintained between the conformance and performance roles of the board.
At MKDL, Corporate Governance emphasizes the enhancement of shareholder value while adopting practices based on transparency and accountability of the society. The board of Director ensures that the activities of the company are always conducted in accordance with the highest ethical standards, in the best interest of all stakeholders and preservation of the environment.
I. The Board of Director The Board of Directors of MKDL comprises of six Directors including Chairman. The Board of Directors endeavors to exercise effective control over the company in formulating and implementing policies and ensuring their effective implementation. All the Directors have access to the advice and services of the company Secretary, who is responsible to the Board for ensuring that the Board procedures are followed and that applicable rules and regulations are complied with. II. Independent Directors: Mr. Salim Raza is Independent Director. He posses extensive business knowledge and experience. III. Management Committee: The day to day management of the company is entrusted with the managing director and the management committee. The managing Director is the Chairman of the management committee. IV. Business Development Committee: The main objective of the committee is to review and analyze the entire gamut of the business activities. V. Inventory Monitoring Committee: Inventory monitoring committee maintains the inventory position of the company and review the inventory situation.
VI. RESPONSIBILITIES TO CUSTOMERS: The company maintains a country wide marketing network and provides a wide choice of products and brands to its customers, to whom it also provides easy payment opportunities. VII. SHREHOLDERS’ ROLE: The directors have always recognized the import role played by the shareholders of the company in assisting the board to implement proper corporate governance. VIII. AUDIT COMMITTEE: In order to review and monitor internal controls in the company and ascertain whether such controls are effective, the directors have appointed an Audit committee comprised by an Executive Committee and one non executive director of the company and headed by a non executive director. The company secretary assumes the role of secretary to the committee. The Chief Financial Officer and Head of Internal Audit attend meetings by invitation. IX. FINANACIAL REPORTING AND TRANPARENCY: Financial statements have been prepared as per Bangladesh Accounting standard laid down by the Institute of Chartered Accountants of Bangladesh. Financial data is circulated as appropriate within and outside the organization. Management accounts are distributed to all management committee. Members while products, channel and divisional profitability statements are distributed to all key and senior managers as well as department heads so that their comments can be ascertained. The timely publication of half yearly and annual financial statements, with comprehensive details beyond the statutory requirements, has been a salient feature of our financial reporting system. The financial statements included in this annual report have been audited by Messers K.M Alam & Co., Chartered Accountants. XI. INTERNAL CONTROL:
Directors are responsible for instituting the system of internal controls to ensure the effective implementation of all policies and decisions of the board. This framework is designed to provide reasonable but not assurance that the assets of the company are safeguard, proper records maintained and reliable information is recorded and provided in respect of both assets and liabilities.
XII. Corporate Social Responsibility: The Board of Director is also awoken of the corporate social responsibilities ( CSR) specialty in the areas of gender equality, race – religion-religion equality, non employment of child labor , human rights, environmental, pollution, social marketing, social activities right to form and participate in union under ILO convention, employment of disables, as per BEPZA rules of Chittagong EPZ etc. Focus of the internship is to know the existing share department, finance department and finally personal department. After study and analyze the above three major areas then I will start to implement these three sectors A) Corporate Governance / Company Secretary, B) Corporate Finance, Investment and taxation C) HRD & Administration in local, foreign, multinational private or public companies.
Part Three Corporate Governance / Company Secretarial Practice A) Corporate Governance / Company Secretary Mithun Knitting & Dyeing Lt(MKDL ) is a leading entity’s of Bangas Tallu Group. It has gone IPO in 1994 and listed with Dhaka Stock Exchange in same year. Company is trying to follow Corporate Governance issue which has published under notification no. SEC/ CMRRCD/2006-158/Admin/02-08, dated the 20th February’06. The Corporate Governance issues are illustrated below: Corporate Governance (CG) : CG is the system by which company’s are directed and controlled by the management in the best interest of the stakeholders and others, ensuring better and timely financial reporting.
Principles of Corporate Governance: (As per identification of Cadbury report) Company is trying to follow these three principles •
Accountability
•
Integrity
•
Openness
By applying CG, company has got the following Benefit. 1. Risk reduces & Controlling 2. Create confidence of stakeholders & others 3. Bring transparency in capital market. 4. Create accountability 5. Increase coordination 6. Decrease dependency on family based business 7. Disclose transparent Directors report as per companies’ act 1994. 8. Disclose independent audit report 9. Disclose true & Fairview of financial report 10. Disclose properly annual report as per IAS 1 11. Disclose clearly notes to the accounts. 12. Assessing risk 13. Stimulate performance 14. Ultimate protection of interest of shareholder As per corporate governance guideline company has formed the under mentioned Committee: 1. Audit Committee 2. Director’s remuneration committee 3. Employees remuneration & Incentive committee 4. Employee recruitment & disciplinary committee
Problem to implement CG issue in MKDL 1. Disclosure shy 2. Family based corporation 3. Lack of technical skilled Independent non executive director 4. Low audit fee 5. Absence of Institutional Investor 6. Week regulatory framework 7. Overstaffing 8. Lack of technical people. Corporate Governance guideline explanation as per SEC notification No SEC/CMRRCD/2006-158/Admin/02-08 dated the 20th February, 2006; whereas the Securities and Exchange Commission deems it fit that the consent already accorded by the Commission, or deemed to have been accorded by it, or to be accorded by it in future, to the issue of capital by the companies listed with any stock exchange in Bangladesh, should be subject to certain further condition. The Conditions: 1. BOARD OF DIRECTORS : Board’s Size: The number of the board members of the company should not less than 5 and not more than 20. As per SEC CG guideline, board size is within limit.
Independent Directors All companies should encourage effective representation of independent directors on their Board of Directors so that the Board, as a group, includes core competencies considered relevant in the context of each company. For this purpose, the companies should comply with the following: (i)
At least one tenth (1/10) of the total number of the company’s board of directors subject to minimum of one should be independent directors.
Company also has employed one independent director for specified period. Explanation: For the purpose of this clause “ Independent Director” means a director who does not hold any share in the company or who holds less than one percent ( 1% ) shares of the company, who is not connected with the company’s promoters or directors or shareholder who holds one percent (1% ) or more than one percent (1% ) shares of the total paid- up shares of the company on the basis of family relationship; who does not have any other relationship, whether
pecuniary or otherwise, with the
company or its subsidiary associated companies, who is not a member, director or officer of any stock exchange, or an intermediary of the capital market. ii)
The independent director(s) should be appointed by the elected directors.
1.3) Chairman of the Board and Chief Executive The position of the Chairman of the Board and the Chief Executive Officer of the companies should preferably be filled by different individuals. The Chairman of the company should be elected from among the directors of the company. The Board of Directors should
clearly define respective roles and
responsibilities of the Chairman and the Chief Executive Officer. Chairman and Chief Executive officer is same person who has elected by BOD by taking permission from proper authority.
1.4) The Directors Report to Shareholders
The
directors of the companies should include following additional
statements in the Directors Report prepared under section 184 of the Companies Act, 1994 (a) The financial statements prepared by the management of the issuer companies present
fairly its state of affairs, the result of its operations, cash flows and
changes in equity. (b) Proper books of account of the issuer company have been maintained. (c) Appropriate accounting policies have been consistently applied in preparation of the financial
statements and that the accounting estimates are based on
reasonable and prudent judgment. (d)
International Accounting Standards, as applicable in Bangladesh, have been followed in preparation of the financial statement and any departure there from has been adequately disclosed.
(e)
The system of internal control is not sound so much in design and need more monitored.
(f)
There are no significant doubts upon the issuer company’s ability to continue as a going concern the fact along with reasons thereof should be disclosed.
(g)
Significant deviations from last year in operating results of the issuer company has been highlighted and reasons thereof should be explained.
(h)
Key operating and financial data of at least preceding three years have been summarized.
(i)
If the issuer company has not declared dividend ( cash or stock) for the year the reasons thereof can be given.
(j)
The number of Board meeting held during the year and attendance by each director has been disclosed.
(k)
The patterns of shareholding should be reported to disclose the aggregate number of shares ( along with name wise details where stated below ) held by:(i)
Present/ Subsidiary/Associated companies and other related parties (name wise details).
(ii)
Chief Executive Officer, Company Secretary , Chief Financial Officer, Head of Internal Audit and their spouses and minor children (name wise details ) are holding any shares.
(iii)
Executives ; and
(iv)
Shareholders holding ten present (10%) or more voting interest in the company ( name wise details ).
Explanation: For the purpose if this clause the expression “ executive� means top the salaried employees of the company, other than the Directors, Chief Executive Officer. Company Secretary, Chief Financial Officer and Head of Internal audit. CHIEF FINANCIAL OFFICER (CFO), HEAD OF
INTERNAL
AUDIT AND
COMPANY SECRETARY:Appointment The company has appointed a Chief Financial Officer (CFO) , a Head of Internal Audit and a Company Secretary , The Board of Directors has clearly defined respective roles, responsibilities and duties of the CFO, the Head of Internal Audit and the Company Secretary, Requirement to Attend Board meetings The CFO and the company Secretary of the company are attending meetings of the Board of Directors, provided that the CFO and/ or the Company Secretary are not attended such part to a meeting of the board of Directors which involves consideration of an agenda item relating to the CFO and / or the Company Secretary.
AUDIT COMMITTEE: The company has an Audit Committee as a sub- committee of the Board of Directors. The Audit Committee has assist the Board of Directors in ensuring that the financial statements reflect true and fair view of the state of affairs of the company and in ensuring good monitoring system within the business. The Audit Committee shall be responsible to the Board of Directors . The duties of the audit committee has clearly been explained set forth in writing. Constitution of Audit Committee (i) The Audit Committee has composed with 3 (three) members. (ii) The Board of Directors have appointed members of the audit Committee who are directors of the company and include one independent directors. (iii)
When the term of service members expires or there is any circumstance
causing any Committee member to be unable to hold office until expiration of the term of service, thus making the number of the Committee members to be lower than the prescribed number of 3 (three) persons the Board of Directors shall appoint the new Committee member(s) to fill up the vacancy(ies) immediately or not later than 1 (one) month from the date of vacancy (ies) in the Committee to ensure continuity of work of the Audit Committee. Chairman of the Audit Committee (i) The Board of Directors have selected 1 (one) member of the Audit Committee whom is Chairman of the Audit Committee.
(ii)
The Chairman of the Audit Committee have
knowledge , understanding
,experience in accounting and finance.
Reporting of the Audit Committee 3.3.1 Reporting to the Board of Directors (i)
The Audit Committee shall report in its activities to the board of Directors .
(ii)
The Audit Committee should immediately report to the Board of Directors in the following findings, if any:(a) Report on conflicts of interests; (b) Suspected or presumed fraud or irregularity or material defect in the internal control system; (c) Suspected infringement of laws, including securities related laws, rules and regulations; and (d) Any other matter which should be disclosed to the Board of Directors immediately.
3.3.2 Reporting to the authorities If the Audit Committee has reported to the Board of Directors about anything which has material impact on the financial condition and result of operation and has discussed with the Board of Directors and the management that any rectification is necessary and if the Audit Committee finds that such rectification has been unreasonably
ignored
the
Audit
committee
shall
report
such
finding
to
the
Commission , upon reporting of such matters to the Board of Directors for three times or completion of a period of 9 (nine) months from the date of first reporting to the Board of Directors, Whichever is earlier.
3.4 Reporting to the Shareholders and General Investors Report on activities carried out by the Audit Committee, including any report made to the Board of Directors under condition 3.3.1(ii) above during the year, have signed by the Chairman of the Audit Committee and disclosed in the issuer company. REPORTING THE COMPLIANCE IN THE DIRECTORS REPORT The directors of the company shall state, in accordance with the annexure attached in the directors report whether the company has complied with these conditions. Status of compliance with the conditions imposed by the Securities and Exchange Commission notification no.SEC/CMRRCD/2006-158/Admin/02-08 dated 20 th February, 2006 issued under section 2CC of the Securities and Exchange Ordinance, 1969: Cond. no.
1.1
Title
Compliance Status
Complied Board’s size: Board members Complied should not be less than 5(Five) and more than 20(twenty)
1.2(i) Independent Director: at least 1/10 1.2(ii) Appointment of independent Director by elected Director 1.3 Chairman of the Board and Chief Executive Officer should preferably be filled by different individuals 1.4(a) Fairness of financial statement 1.4(b) Maintenance of proper books of Accounts 1.4(c) Appropriate accounting policies applied consistently 1.4(d) International accounting policies standards, as applicable in Bangladesh have been followed in preparing the financial statements 1.4(e) Sound and effective internal control system 1.4(f) Ability to continue as going concern 1.4(g) Significant deviations from last year in operating results
Complied Complied Complied
Complied Complied Complied Complied
Complied Complied Complied
Explanation for non compliance Not
complied
1.4(h)
Summary of key operating and financial data 1.4(i) If dividend has not been declared, the reason thereof 1.4(k) Pattern of share holding 2.1 Appointment of a CFO and Head of internal Audit and accompany Secretary 2.2 Attend the Board Meeting by CFO and Company Secretary 3.00 Constitution of audit committee 3.1(i) The audit committee should be composed of at least three members 3.1(ii) Members of audit committee should be appointed by the Board who are directors and one should be in depended 3.1(iii Board of Director should fill ) u[ the vacancy within one month of the vacancy in the audit committee 3.2(ii) Chairman of the audit committee should have a professional qualification or knowledge, understanding and experience in accounting and finance 3.3.1( Reporting to the Board of i) Director of the Audit Committee 3.3.1( Report of conflict of interest ii)(a) 3.3.1( ii)(b) 3.3.1( ii)(c) 3.3.1( ii)(d) 3.3.2
Complied Complied Complied Complied Complied Complied Complied Complied
Complied
Complied
Complied Not
applicable Reporting of any fraud or Not irregularity or material defect in applicable internal control system Reporting of infringement of Not laws, including securities related applicable laws , rules and regulations Not Reporting of any others matter to applicable sthe Board of Director Reporting to the Authorities: Not If the audit Committee has applicable reported to the Board of Directors about anything which has material impact on the financial condition and results of operation and being ignored by the Board 0f Directors, the Audit Committee
N/A
should report such findings to the Commission 3.4
4.00(i ) 4.00(i i) 4.00(i ii)
4.00(i v) 4.00( v) 4.00( vi) 4.00( vii)
Reporting to the shareholders: Report on activities carried by the Audit Committee including any report made to the Board of Directors under condition 3.31(ii) and the Disclosure of which should be made in the Annual Report Non-engagement of External/Statutory Auditors in appraisal or valuation Non-engagement of External/Statutory Auditors in designing in financial information system Non-engagement of External/Statutory Auditors in book-keeping or others services related to the accounting records of financial statement Non-engagement of External/Statutory Auditors in broker dealer services Non-engagement of External/Statutory Auditors in actuarial services Non-engagement of External/Statutory Auditors in internal audit services Non-engagement of External/Statutory Auditors in any other services
Complied
Complied Complied
Complied
Complied Complied Complied Complied
Appointment of Directors: 1. Notwithstanding anything contained in the articles of a company(a) the subscribers of the memorandum was the directors of the company until the first director are appointed. (b) the directors of the company have been elected by the members from among their number in general meeting; and
(c) Any casual vacancy occurred was filled up by BOD. (2) As per Contained in the articles of a company and companies act one third of the whole number of directors are retiring whose period of office is liable to determination at any time by retirement of directors rotation. Consent of Candidate for Directorship U/S 93: As per act ( 1) Every person, proposed as a candidate for the office of a director shall sign, and file with the company, his consent in writing to act as a director. (2)
A person shall not act as a director of the company unless he has , within
thirty days of his appointment, signed and filed with the Registrar his consent in writing to act as such director. Disqualifications of Directors U/S 94: According to act, company follows following rules and regulation (01).A person shall not be capable of being appointed director of a company, if(a) he has been
found to be of unsound
mind by a competent court and the
findings is in force; or (b) He is an undercharged insolvent; or (c) He has applied to be adjudicated as an involvement and his application is pending; or (d) He has not paid any call in respect of shares of the company held by him, whether alone or jointly with others, and six months have elapsed from the last day fixed for the payment of the call; or (e) He is a minor. (02) A company may in its articles provide additional grounds for disqualification of a director. Notice of the meetings: Notice of every meeting of the Board of directors of the company shall be given in writing to every director for the time being in Bangladesh and at his in Bangladesh.
Meeting of Board: In the case of every company a meeting of its Board of directors shall be held at least once in every three months and at least four such meetings shall be held in every year. 8 Board meeting was held in year 2008. Qualifications of director: 1. Without prejudice to the restrictions imposed by section 92 , it shall be the duty of every director to held qualification share to be specified in the articles and, if he is not already qualified, he shall obtain his qualification within sixty days after his appointment, or such shorter time as may be fixed by the articles . 2. If, after the expiration of the period mentioned in sub-section (1) any unqualified person acts as director of the company, he shall be liable to a fine not exceeding two hundred taka for everyday between the expiration of the said period and the last day in which if is proved that he acted as a director ( both days inclusive). Validity of Act of Director: The acts of a director shall be valid notwithstanding any defect that may afterwards be discovered in his appointment of qualification. Provided that nothing in this section shall be deemed to give validity to acts done by a director after the appointment of such director has been shown to be invalid. Ineligibility
of Bankrupt to Act as Director:
(1) If any person being an un discharged insolvent acts as director or managing agent or manager of any company , he shall be liable to imprisonment for a term not exceeding five thousand taka or to both. (2)In this section the expression “company� includes a company incorporated outside Bangladesh which has an established place of business within Bangladesh. Appointment and terms and office of Alternate Directors (1) The Board of Directors of a company may, if so authorized by its articles or by a resolution passed by the company in general meeting , appoint an alternate director,
to act for a director hereinafter in this section called the original director during his absence for a continuous period of not less than three months from Bangladesh. (2) An alternate director appointed under sub-section(1) shall not hold office as such for a period longer than that permissible to the original director in whose place he has been
appointed and shall vacate the
office, immediately after he receives
information that the original director has returned to Bangladesh. (3) If the term of office of the original director is determined before he so returns to Bangladesh any provision for automatic re-appointment of retiring directors in default of another appointment shall apply to the original and not to the alternate director. Avoidance of Provisions Relating Liability of Directors: Save as provided in this section, any provision, whether contained in the articles of a company or in any contract with a company or otherwise, hereafter in this section referred to as the said provision, for exempting any director, manager or officer of the company or not, employed by the company as auditor from, or for indemnifying him against, any liability which by virtue of any rule of law would otherwise attach to him in respect of any negligence, default, breach of duty or breach of trust of which he may be guilty inter relation to the company shall be void; Provided that – (a) Nothing in this section shall operate to deprive any person of any exemption or right to be identified in respect of anything done or omitted to be done by him while the said provision was in force before the commencement of this act ; and (b)A company may, in pursuance of the said provision indemnify any such director, manager, officer or auditor against any liability incurred by him in defending any proceedings, whether civil or criminal, in which judgment is given in his favors or in connection with any application under section 396 of this Act in which relief is granted to him by the court.
Loan of Director: (I)No company, hereafter in this section referred to as the lending company, shall make any loan or give any guarantee or provide any security in connection with a loan made by a third party to(a)any director of the lending company; (b) any firm in which any director of the lending company is a partner; (c)any private company of which any director of the lending company is a director or member; or (d) any public company, the managing
agent , manger or director
where of is
accustomed to act in accordance with the directors or instructions of any director of the lending company: provided that noting in this section shall apply to the making of a loan or giving of any guarantee or providing any security by a lending company, if(i) such company is a banking company or a private company not being a subsidiary of a public company, or if such company as a holding company makes the loan or gives the guarantee or provide the security to its subsidiary; and (ii)the loan is sanctioned by the Board of Directors of any company and approved by the general
meeting and, in the balance sheet, there is a specific mention of the ,
guarantee or security, a s the case may be: provided further that, in no case the total amount of the loan shall exceed 50% of the paid value of the shares held by such director in his own name.
(I) In the event of any contravention of sub-section(1) every person who is a party to such contravention including in particular any person to whom a loan is made is on whose belief of guarantee is given to or security provided shall be punishable with the fine which extend to five thousand taka or simple imprisonment for six months in lieu of fine and shall be liable jointly and severally to the lending company for the
repayment of such loan or for making good any sum which the lending company may be called up to pay under the guarantee given or security provided by the lending company. (II)This section shall apply to any transaction represented by a book debt which was from its inception in the nature of loan or an advance. Director not to Hold Office of Profit: No director or firm of which such directors a partner of private company of which such director is a Director shall , without the consent of the company in general meeting, hold any office of profit under the company except
that of a managing
director or manager or a legal or technical adviser or a banker. Explanation- For the purposes of this section, the office of managing agent shall not be deemed to be an office of profit under the company. Sanction of Directors Necessary for Certain Contracts: Except with the consent of the directors, a director of the company, or the firm of which he is a partner of any partner of such firm or the private company of which he is a member or director , shall not enter into any contract for the sale, purchase or supply of goods and materials with the company. Removal of Directors: (1) the company may by extraordinary resolution remove any share-holder director before the expiration of his period of office and may by ordinary resolution appoint another person in his stead and the person so appointed shall be subject to retirement at the same time as if he had become a director on the day on which the director in whose place he is appointed was last elected director. (2) a director so removed shall not be re-appointed a director by the Board of Directors.
Functions of a Company Secretary: A company registered under Companies Act is a persona juris, cannot act by itself like a natural person and as it is a miniature republic, which is composed of its
members, who are its shareholders and real owners. It is managed on democratic principles by the elected representative of the members, who are called directors and collectively expressed as the Board of directors. The company can be run and managed either by the Board of Directors itself or by the Board of Directors with the help of Managing Director or Chief Executive. Board of Directors of a corporate management is the brain of the Company and the Company Secretary is the ears, eyes and hands. Company
Secretary
performs
and
entrusted
with
the
following
responsibilities: The functions of accompany secretary , their nature
duties
and
and volume,
depend on the nature and size of the business of the company. A large diversified company
with geographically decentralized, multi-plant operations may have large
number or corporate legal problems requiring a separate full fledged legal department. The secretary may be placed in charge of the legal department and his function may be the supply of centralized legal services to the various units of the company. But in a small company the secretary is likely to be involved only in the routine jobs of day to day administration of company and secretarial functions as per Companies Act and directives of Securities & Exchange Commission. The functions performed by a secretary will also depend upon his ability and personality. If the secretary is highly trained and experienced and possesses a good personality, he will be able too earn the confidence of the directors, The directors will depend more and more on the secretary. The functions of the secretary will not be limited to routine affairs of company management. He will be able to contribute in the formulation of company policies and strategies. From the position of a mere routine secretary, he raises himself to the status of an executive secretary. The company secretary is performed the following major duties: In regard to- company affairs (1)Dealing with Members, Shareholders and meet their queries. (2)Convene the Board and Shareholders meeting in time . (3)Watch that the notices are dispatched properly and timely. (d) Make sure that the quorum is present before business of the Board or Shareholders is transacted at the meeting (e) Prepare minutes of the meeting timely and correctly obtaining signature of the chairman of the meeting and circulating the same
among the Members of the Board and therefore maintain minutes book. (f) Make arrangement for inspection of minutes and provide copies therefore if so requested by the members. (g) Taking all necessary measures including preparation of Annual Report to conduct the General Meeting in time according to the Companies Act, Rules and Regulation of Securities and Exchange Commission (SEC) and Stock Exchanges. (h) Preparing Annual Report for the Shareholders. (i) File all Returns like List of members and Summary of Share Capital (Schedule-X), Particulars of Directors (Form-XII) in case of any change in the Board of Directors, Authenticated Balance Sheet and Profit & Loss Account, Consent to act as Director, Change of Address , Return
of
Allotment, Change
in
Capital , Special
Resolution, etc as and when required. (j) Arrange for audit and preparation of financial report as per Companies act, IAS and ISA. (k)
Compliance of SEC, DSE, CSE and other govt.
authorities
requirement. (l) Submission of periodical report like Annual report, Half-yearly Financial Report, Monthly various report in time according to the regulation of the SEC, DSE and CSE. (m) Duty to see various deeds , contracts and agreements whether these are properly framed worded and terminologically in order before vetting and submission before the Board for approval. (n) Company Secretary is one of the signatory of such agreements, contracts and deeds at least a knowledgeable witness . (o) Corporate Governance according to the SEC Notification. (p) Maintain the statutory registers like i.
Register of Members
ii.
Register of Transfer of shares
iii
Register of Directors
iv
Register of Mortgage and Charges
v
Register of Dividend
vi Register of Contract with Director vii Minutes Books Share Department i) Supervise maintenance of Computerized Share Management System ( for non demated shares ) and measures of transfer of public shares according to the regulation of SEC, DSE, and CSE. ii) Supervise maintenance of Share Management System under Central Depository System (CDS) for demated shares like Dematerialization , Rematerialization , Freeze and Freeze Release Request etc. iii)
Supervising in regard to issue of dividend warrant , bonus shares certificate and in case of demated shares crediting bonus shares to the respective BOID holder in time.
iv)
Submission of report about completion dividend distribution as per SEC, DSE and CSE Rules and Regulation.
v)
Submission of monthly shareholding report to SEC according to prescribed format.
Part Four CORPORATE FINANCE, INVESTMENT AND TAXATION Following sections shows the financial statements that are prepared and published by Mithun Knitting and Dyeing (CEPZ) Ltd. for the year ended June 2008:
Analysis of the financial statements: Financial Summary Taka
Five Years positions at a glance S L
thousand Figure in Million Taka 20032002-
2006Items Authorized Capital Issued and paid up capital Reserve and surplus
07 100,000 50,000 33,226
in
2005-06 100,000 50,000 28,814
2004-05 100,000 50,000 24,622
04 100,000 50,000 24,273
03 100,000 50,000 25,047
Long term loan Fixed Assets ( Net ) Current Assets ( Net ) Current Liabilities Dividend Sales ( Export ) Gross Profit Operating Profit Net Profit Earning per share (Tk) Net worth per share ( Tk ) No of shareholders No of employment
44,080 92,360 290,676 254,859 5,000 556,267 42,753 5,886 7,411 14.82 166 964 498
63,622 109,360 246,293 209,948 3,000 556,126 43,901 7,104 6,692 13.38 158 1742 478
83,154 128,365 217,996 184,940 2,500 359,455 31,130 5,318 3,098 6.20 149 1639 424
27,275 68,305 202,000 166,543 2,500 346,204 29,359 4,921 1,977 3.95 149 2109 398
Corporate Finance: Company’s corporate office is located at South Avenue tower, Gulshan Avenue, Gulshan -1, Dhaka. Executive Director is departmental head for Accounts & finance department. Besides the corporate office, company has liaison office at Sara tower, Motijheel, Dhaka. Share departments is located at Sara tower, where are working three share officer under supervision of company secretary. Finance & Accounts departments are located at corporate office. There are four Accounts officers who are directly related to meet up day to day operation. Mangers are related to meet up midlevel works that means negotiation, system implementation. Executive Director, Finance is supervised the all over works of Finance & Accounts related works. He is also involved the policy making with sponsors directors. All banking related works, Loan sanctioned, Loan renewal etc are directly supervised and decided by him with consult of Board of Directors. Besides the above, All Accounts & Finance related works are depicted below: 01. Voucher preparation: Several types of vouchers are prepared by the Accounts officers. All vouchers are prepared automatically from customized software. When vouchers are prepared by the officers then vouchers entries are posted automatically. Side by side company is maintaining subsidiary party ledgers. As a result company can reconcile by comparing with software data and manual record data. There are five types of vouchers are preparing in every day for financial statement. •
Cash receive voucher,
•
Cash payment voucher,
•
Bank payment voucher
36,031 78,882 142,911 110,773 5,000 263,265 27,458 4,736 4,743 9.49 149 364
•
Bank received voucher
•
Journal voucher
Cash received voucher: Maximum sales proceeds are coming from export.Other than export some local sales, wastages sales, scrapes or any refund, which is received by cash received voucher. This cash received vouchers are reflected in trial balance. Cash Payment vouchers: All party payments and others day to day operations are meeting through cash payment voucher. Bank Payment Voucher: Party payment and other day to day operations, which are paying through other than cash then it is Bank payment voucher. Bank received Voucher: All sales proceeds are coming from export then it is required to Bank received voucher. Other then export, some B grade fabrics, scrapes, wastages have to require selling then it is received by Bank received voucher. Journal Voucher: All transactions which are not direct related to Cash or bank then it is called journal voucher. All sales proceeds are coming from export that is given on LC 90 or 120 days. So all sales proceeds are recording through journal voucher. Any accrual payment and received, closing entry, adjusting entry and reversing entry are recorded through journal voucher. Besides the above, Banking transaction of MKDL is doing with BASIC Bank, Shantinagar branch, Dhaka. Bank has sanctioned CC (Hypo) limit Tk 5 crore for day to day operation by meeting up and others facilities as like as LC stance facility, bill purchase limit, Loan against trust receipt (LTR). Without above facilities bank has given the handsome project loan to set up the new plants. Bank has disbursed additional amount Tk 6.30 crore for BMRE of the factory. Organ grams of the Accounts & Finance departments are depicted below: Managing Director
Executive Director (Finance & Accounts)
G.M, Finance
Manager (Accounts) Accounts officers (2)
Manager (Finance) Accounts officers (2)
Fig 01 : Organogram Nature of Works at a glance: •
Monthly Accounts & Cash flow statement.
•
Financial related all proposal submission to Bank.
•
LTR & Bill purchase monitor.
•
Day to day Bank balance monitor.
•
All bills, Voucher check.
•
Supplier register monitor.
•
All MIS & management accounting report submission.
•
Company affairs related works.
•
Income tax related all works.
•
Loan proposal to different bank.
•
Store Management & Inventory management controlled.
•
Factory Accounts.
•
SEC related works
•
Voucher preparation ( Cash receipts & payment )
•
Voucher preparation ( Bank receipts & payment )
•
Voucher preparation ( journal & other types of voucher )
Accounts & Finance related works are doing same people simultaneously. The detailed works are depicted below:
Company is maintaining customize software for vouching entry and finalize the financial statement. All types of vouchers are preparing automatically from software. For party payment, Cash payment vouchers or Bank payment vouchers are preparing through applying customize software and data’s are entered automatically after voucher printed and side by side is maintaining manual register for party payment.
Investment: MKDL was invested handsome amount to install factory in Chittagong EPZ at plot no.44-46, sector -04. Company initially established Knitting & Dyeing factory in 1991 with project cost Tk 20 crore of which paid up capital was 5 crore. . Total Project cost of remaining portion was financed by BASIC Bank, Shantinagar Branch. Debt: Equity ratio was 75:25. MKDL started its operations with 50 knitting circular machines and automated two mercharising m/c, three dyeing m/c & three finishing m/c with 6 tons dyeing capacity. Origins of these machineries were Taiwan, Switzerland & Germany which were latest & costly. Initially company was not started its knit garments division. Within few years company started knit garments division in 1 st floor of knitting division building with capacity 10,000 pcs per day. Every year MKDL has to require to import new capital machineries to modernized & adopt the present market situation and side by side expand the project to increase the capacity to meet up the market demand. Due to expansion & modernization the project, now project cost has reached at 40 crore from 20 crore. Company started its commercial operation in 1993. After commencement of Incorporation Company is investing in capital machinery in every year. At present Knitting machines are more than 100 and has to require investing in dyeing division.
Taxation:
MKDL corporate office is at Uzirpur, Chuadanga. Company submits its return
in every year in Khulna circle. Company is not giving TDS ( Tax deduction at sources ) from sales proceeds due to located in EPZ. Company’s financial year is July –June. Return has to require for submission within July in every year in Khulna circle. Financial statement for return submission is prepared from head office in Dhaka. One of the executive directors who are dealing this matters and negotiates the every matters of income tax. MKDL is enjoying 50% tax rebate on tax rate due to locate at EPZ.
Value Added Statement For the year ended 30 June 2008.
The value added statement for the company shows how the value is created and distributed among different stakeholders of the company
Particulars
2008
Turnover Gross Less: Cost of Goods Sold Total value added
Taka 662,917,404 606,882,953 56,034,451
%
2007
%
Taka 556,267,274 513,513,291 42,753,291
Distribution of added value To Employees and dealers 40,169,412 To Government Income Tax & value 1,414,521
31,233,988 871,495
added tax To Bank and other lenders 31,307,223 To suppliers of capital ( Dividend) 5,000,000 Retained for Reinvestment & future 85,626,899
28,350,187 5,000,000 83,226,394
growth Depreciation
22,218,714
23,592,718 187,110,773
100% 170,900,778
100%
Market Value Added Statement For the year ended 30th June 2008 Market Value Addition (MVA) is the difference between the equity market value of a company and the book value of equity invested in the company. A high MVA indicates that the company has created substantial wealth for the shareholders. Fig. in Taka
Particulars
2008
Market value of Total Equity Less: Book value of Total Equity Market Value Addition
105,000,000 50,000,000 55,000,000
Equity of the Company The Authorized Capital of the company is TK. 100 million and paid-up capital of the Bank is TK. 50 million as on 30-06-2008. Total equity was TK. 85.63 million as on 30-6-2008. SL.No. Particular
2008
%
2007
A)
Paid-up capital
50,000,000
58.3
50,000,000
B)
Tax Holiday Reserve
16,413,572
9 19.1
16,413,572
9,213,327
7 10.7
6,812,822
5,000,000 5,000,000 85,626,899
6 5.84 5.84 100
5,000,000 5,000,000 83,226,394
C)
Retained Earnings
D) E)
General Provision Other reserve Total
In million Taka
Equity Movement from 2004 to 2008
100 80
71.23
78.81
83.23
85.63
60 Total Equity
40 20 0 2004
2006
2007
2008
Year
Investment Company has invested Tk 13.74 million in year 2008 and this investment was Tk 8.50 million more than previous, which was 162.34% more than previous year.
Taka in million
300 250
2 4 3 .3 2
2 4 8 .4 7
2 6 2 .2 1
200 150
Existing
100
New Inv.
50 0 2006
2007
2008
From this chart an Investor can easily realize what the growth of the company year to year.
Trend of EPS from 2000 to 2008 25
Taka
20 15
16.92
19.11 13.38
10
8.68
9.49
8.38
5
14.82
14.8 EPS
6.20
0 2000
2001
2002
2003
2004
2005
2006
2007
2008
Trend of Net Asset value per share from 2000 to 2008
Taka
200 166.45 171.25 152.97 149.24 157.63 150.09 141.93 140.61 132.82
150 100
NAV
50 0 2000
2001
2002
2003
2004
2005
2006
2007
2008
Taka
Trend of Price Earnings Ratio from 2000 to 2008
16 14 12 10 8 6 4 2 0
14.41
13.56 10.37 6.04
2000
9.17
10.75 6.43
5.09
2001
2002
Dividend from 2000 to 2008
2003
2004
2005
2006
5.06
2007
2008
Price earning Ratio
14 12
12
Taka
10
10
10
10
10
8 6
5.00 5.00 5
4
6
Dividend
2 0 2000 2001 2002 2003 2004 2005 2006 2007 2008
Dividend Yield from 2000 to 2008
14 12
Taka
10
11.79 10.28
11.11
8 6
5.75 5.56 5.95
7 4.33 4.69
4
Dividend Yield
2 0 2000 2001 2002 2003 2004 2005 2006 2007 2008
In million Taka
Equity Movement from 2000 to 2008
12 10 8
8.46
9.55 6.69
6 4.34 4.74 4.19
4 2
7.41 7.4
3.1
Net Incom e
0 2000 2001 2002 2003 2004 2005 2006 2007 2008
Conceptual Framework The first level of the conceptual framework suggests the objectives of financial reporting. (1) Useful to those making investment and credit decisions who have a reasonable understanding of business and economic activities
(2) Helpful to present and potential investors, creditors, and other users in assessing the amounts, timing, and uncertainty of future cash flows (3) And about economic resources, the claims to those resources, and the changes in them. The objectives, therefore, begin with a broad concern about information that is useful to investor and creditor decisions. That concern narrows to the investor’s to the investors’ and creditors’ interest in the prospect of receiving cash form their investments in or loans to business enterprises. Finally, the objectives focus on the financial statements that provide information useful in the assessment of prospective cash flows to the business enterprise. This approach is referred to as decision usefulness. It has been said that the golden rule is the central message in many religions and the rest is elaboration. Similarly, decision usefulness is the message of the conceptual framework and the rest is elaboration. In providing information to users of financial statements, general purpose financial statements are prepared. These statements provide the most useful information possible at minimal cost to various user groups. Underlying these objectives is the notion that users need reasonable knowledge of business and financial accounting matters to understand the information contained in financial statements. This point is important. It means that in the preparation of financial statements a level of reasonable competence on the part of users can be assumed. This has an impact on the way and the extent to which information is reported. Qualitative Characteristics of Accounting Information Financial Report should comply with some qualitative characteristics. These characteristics can make close to perfect. How does one decide whether financial reports should provide information on how much a firm’s assets cost to acquire (historical cost basis) or how much they are currently worth (current value basis)? Or how does one decide whether the three main segments that constitute should be combined and shown as one company or disaggregated and reported as three separate segments for financial reporting purposes?
Choosing an acceptable accounting method, the amount and types of information to be disclosed, and the format in which information should be presented involves determining which alternatives provides the most useful information for decision making purposes (decision usefulness.) The FASB has identified the qualitative characteristics of accounting information that distinguish better (more useful) information from inferior (less useful) information for decision making purposes. Decision Makers (Users) and Understandability Decision makers vary widely in the types of decisions they make, how they make decisions, the information they already possess or can obtain from other sources, and their ability to process the information. For information to be useful there must be a connection (linkage) between these users and the decisions they make. This link, understandability, is the quality of information that permits reasonably informed users to perceive its significance. Recognition and measurement concepts I) Assumption: a) Economic entity: Economic entity assumption means that economic entity can be identified with a particular unit of accountability. In other words, the activity of business enterprise can be kept separate and distinct from its owners and any other business unit. In practically Directors are separate from the business under considering this concept. b) Going concern: Company’s is continuing its business to follow the assumption of going concern. c) Monetary unit: The monetary unit assumption means that money is common denominator of economic activity and provides an appropriate basis for accounting measurement and analysis. The monetary unit is relevant, simple, universally, universally available, understandable and useful. Singer is multinational company. In the Bangladesh, price level changes are ignored in accounting, and the unit is measure – the Taka. d) Periodicity: The periodicity assumption implies that the economic activities of an enterprise can be divided into artificial time periods. These time periods vary, but the most common are monthly, quarterly, and annually. MKDL time period is annually from July to June.
II) Basic principles: a) Historical principles: GAAP requires that most assets and liabilities be accounted for and reported on the basis of acquisition price. This often referred to as the historical cost principle. MKDL is recognizing its assets as historical cost and subsequent year is cost less depreciation. b) Revenue Recognition: The revenue is recognized as follows the conditions of revenue recognition as provided in IAS-18. 1) Income from sales proceeds has been accounted for on accrual basis. 2) Income from sales proceeds which actually delivered during that period is recognized at the time of sale. c) Matching principles: In recognizing expense, the approach followed is, “Let the expense follow the revenues.” Expenses are recognized not when wages are paid, or when the work is performed or when a product is produced but when the work or the product or the product actually makes its contribution to revenue. Product cost of MKDL Direct relationship between cost and revenue. Period cost of Mithun is no direct relationship between cost and revenue. d)Full disclosure: As per IAS MKDL has disclosed every items if required to disclose of balance sheet items, Income statement, Cash flow statement and changes in equities. Primary Qualities: Relevance and Reliability Relevance and reliability are the tow primary qualities that make accounting information useful for decision making. As stated in FASB Concepts Statement No. 2, the qualities that distinguish better ‘better’ (more useful) information from inferior’ (less useful) information are primarily the qualities of relevance and reliability with some other characteristics that those qualities imply. Relevance:
To be relevant, accounting information must be capable of making a difference in a decision. If certain information has no bearing on a decision, it is irrelevant to that decision. Relevant information helps user make predictions about the ultimate outcome of past, present, and future events; that is, it has predictive value. Relevant information also helps users confirm or correct prior expectations; it has feedback value. When Mithun Knitting & Dyeing (CEPZ ) Ltd issues an interim report, this information is considered relevant because it provides a basis for forecasting annual earnings and provides feedback on past performance. For information to be relevant, it must also be available to decision makers before it loses its capacity to influence their decisions. Thus timeliness is a primary ingredient. But my selected company ‘Mithun Knitting & Dyeing (CEPZ) Ltd does not provide interim report. So this report is not relevant. This report is like “The house had burnt before the fire service came. The annual report 2008 has been published in the end of 2008. For information to be relevant it should have predictive or feedback value and it must be presented on a timely basis. Reliability: Accounting information is reliable to the extent that it is verifiable, is faithful representation, and is reasonably free of error and bias. Reliability is a necessity for individuals who have neither the time nor the expertise to evaluate the factual content of the information. Here Mithun Knitting & Dyeing (CEPZ) Ltd has provided an audited Balance Sheet, Profit & Loss A/C. So it is reliable. Verifiability: It is demonstrated when independent measurers, using the same measurement method, obtain similar results. As Mithun Knitting & Dyeing ( CEPZ ) Ltd has provided an audited report, it is verifiable. Representational Faithfulness
It means that the numbers and descriptions represent what really existed or happened. The accounting numbers and descriptions agreed with the resources or events that these numbers and descriptions purport to represent. Neutrality It means that information cannot be selected to favor one set of interested parties over another. Factual, truthful, unbiased information must be the overriding consideration.
Secondary Qualities: Information about an enterprise is more useful if it can be compared with similar in formation about another enterprise at other points in time (consistency). Comparability: Information that has been measured and reported in a similar manner for different enterprises is considered comparable. Comparability enables users to identify the real similarities and differences in economic phenomena because these differences and similarities have been obscured by the use of noncom parable accounting methods. Resources allocation decisions involve evaluations of alternatives; a valid evaluation con be made only if comparable information is available. Consistency: When an entity applies the same accounting treatment to similar events, from period to period, the entity is considered to be consistent in its use of accounting standards. It does not mean that company cannot switch from one method of accounting to another. Company can change methods, but the changes are restricted to situations in which it can be demonstrated that the newly adopted method is preferable to the old. Then the nature and effect of the accounting change, as well as the justification for it, must be disclosed in the financial statements for the period in which the change is made. When there has been a change in accounting principles, the auditor refers to it in an explanatory paragraph of the audit report. This paragraph identifies the nature of the change and refers the reader to the note in the financial statements that discusses the change in detail.
Significant Accounting Policies: Basis of preparation of the Financial Statements The Financial Statements of the company were prepared under the historical cost convention consistently with those of previous year. Companies Act 1994, the Securities and Exchange Rules 1987, Bangladesh Accounting Standards (BAS), International Accounting Standards (IAS), International Financial Reporting Standards (IFRS), International Auditing standard, Financial Accounting Standards issued by the Accounting & Auditing Organization. Basic Earning per share This has been calculated by dividing the basic earnings by the weighted average number of ordinary share outstanding during the period as per IAS-33 “Earning per Share�. Diluted Earning per share is not required to be calculated for the year, as there exist of no dilution possibilities during the year. Cash Flow Statement Cash flow statement is prepared principally in accordance with IAS 7 Cash Flow Statement
Ratio Analysis Cash basis measures of Liquidity
1. Current Cash debt coverage ratio:
Net Cash flow from Operating activities / Average Current Liabilities 64,168,363 241,251,632
= 0.266
2. Cash basis measures of Solvency
3. Cash basis measures of Profitability
Net Cash provided from Operating activities/ Actual Total Liabilities 64,168,363 268,422,082 =0.2391 Net Cash provided from Operating activities/ Net Investment 64,168,363 82,507,861
=0.239
Comments:
1. Current cash debt coverage ratio is 0.266: 1. Bank has cash 0.266 to pay off Current liability of Tk.1. So the position of the Bank of Current cash debt coverage is good. 2. Cash basis measures of solvency are 0.2391:1. Bank has ability to pay off cash Tk. 0.2391 for total liability against TK. 1. So this condition is measurable. 3. Cash basis measures of Profitability ratio is 0.239:1. Bank has ability to earn profit TK. 0.239 by investing TK. 1. So profitability is good.
Conclusion: Company is rising as a result it is investing its fixed assets in every year. Company started its operation with project cost approx. Tk 20 crore. Now project cost / investment is double the initial starting investment. So company has steady growth. Company has enjoyed tax holiday 10 years. Tax holiday period has finished already .Now company is enjoying another tax advantages as a export oriented industry for location at EPZ. As a public Ltd company, investors can get much information from an annual report. Decision making is depending on some key factors. If bad decision is taken, investor will go to torment. To take good decision investors need reliable, verifiable, comparable, relevant information is very necessary. These things are available in an annual report. MKDL annual report is reliable, verifiable and comparable. As per IAS -1 financial statement has been presented which covered Financial statements, Balance sheet, Income statement, Cash flow statement and
changes in equity complying the conceptual framework, International
Accounting standard, notes to the accounts if required. Company calculated the EPS as per IAS -33, Deferred tax liability as per IAS -12, Inventory as per IAS -2, cash flow statement as per IAS -7, Foreign exchange transaction as per IAS -21, transaction with related parties as per IAS -24, Current and non current liabilities as per IAS -13, proposed dividend has been presented as per revised BAS or IAS, “ Presentation of Financial statements� adopted by ICAB as BAS -1 and all notes & records as per IAS, IFRS, companies act 1994, Securities exchange rules 1987, Dhaka stock exchange rules and other regulatory rules as per guideline with some exception.
Part Five HUMAN RESOURCES MANAGEMENT
AND ADMINISTARTION
Human resources department & Administration The Human Resources Management (HRM) function includes a variety of activities, and key among them is deciding what staffing needs you have and whether to use independent contractors or hire employees to fill these needs, recruiting and training the best employees, ensuring they are high performers, dealing with performance issues, and ensuring your personnel and management practices conform to various regulations. Activities also include managing your approach to employee benefits and compensation, employee records and personnel policies. Usually small businesses (for-profit or nonprofit) have to carry out these activities themselves because they can't yet afford part- or full-time help. However, they should always ensure that employees have -- and are aware of -- personnel policies which conform to current regulations. These policies are often in the form of employee manuals, which all employees have. Note that some people distinguish a difference between HRM (a major management activity) and HRD (Human Resource Development, a profession). Those people might include HRM in HRD, explaining that HRD includes the broader range of activities to develop personnel inside of organizations, including, egg, career development, training, organization development, etc. There is a long-standing argument about where HR-related functions should be organized into large organizations, egg, and “should HR be in the Organization Development department or the other way around?" The HRM function and HRD profession have undergone tremendous change over the past 20-30 years. Many years ago, large organizations looked to the "Personnel Department," mostly to manage the paperwork around hiring and paying people. More recently, organizations consider the "HR Department" as playing a major role in staffing, training and helping to manage people so that people and the organization are performing at maximum capability in a highly fulfilling manner.
The Human resources department and administration is combined which works are performed by same department of MKDL. It has one Executive Director as a departmental head who is controlling the administration and simultaneously human resources department. Besides the above MKDL has one Executive Director who is monitoring the all works. He is monitoring production related all works and side by side helps the HRD head to perform its works nicely. MKDL has sent the ACR (annual confidential report) two times in a year. One is prepared in middle of June and another is prepared Middle of December. ACR report is prepared on the basis of working performance and personal behavior of employees. Considering the above activities employees are given grade from A to D. If any employee’s performance is better then he will get A grade and subsequently B,C, & D grade. Considering the grade, employees are getting increment. All of the grades are submitted to executive director. Executive director implement it by giving increment with consult the top management. Besides the above MKDL employment for new employees are following HR policy. Organ gram of MKDL is as under: Executive Director (HR)
Manager (HR)
Executive ( HR)
Executive (HR)
Fig 04: Organogram of HRD Office order: Company has to meet day to day operation. To perform this day to day operation, company has to require different types of office order. If and when require any order then issue from head office and side by side from factory office.
BEPZA rules: MKDL’s locates in Chittagong EPZ. Company has to maintain labour law, Industrial law, wages act in addition to BEPZA rules. Leave of absence: Company is giving holiday 21 days in year in addition to Government holiday. Besides the above any employee will get 14 days medical holiday for sickness yearly. Holiday: Friday is normal holiday in a week. MKDL has separate corporate office than factory office. Corporate office is following all government holiday but factory office has to require extra work sometimes in holiday for meeting up the buyer requirement.Company is following all Government holiday. Factory officers and workers have to require sometimes duty during holiday due to emergency meet up. Factory is located in EPZ. Company has to follow the BEPZA policy of holiday for factory office. Recruitment policy: If the company wants to require to further employ then gives advertisement in news paper and side by side bdjobs online. Discharge of employee: If MKDL is required to discharge the employee then has to give three months extra salary from discharge period who are employed as executives and above. Appointment policy: MKDL is proving appointment letter to employ manpower. One month notice period is obligatory from both sides. Otherwise one month salary will be surrendered from both parties. Bonus Policy: MKDL provides bonus two times during Eid. One bonus provides in Eid ul Azha which equivalent to 50% of gross salary. Another bonus will provide in EId ul fitre which also equivalent to 50% of gross salary. Without above mention bonus, employee will not get any bonus. Incentive bonus: Workers will get incentive bonus who attend all days in a month. These workers will get extra lum sum amount without salary. Holiday allowance: Any worker and employee work in a holiday he gets holiday allowance or overtime as per category of job nature.
Provident Fund policy: MKDL is maintaining provident fund to its employees. For PF, company has completed the formalities as per PF rules. Employees & Employer are contributed equally 5% on gross salary. One has trustee board to take decision of PF related issue. Company has opened one account to deposit the fund amount. Employee can draw the fund which is equivalent to his deposited portion. Without trustee board permission, any decision was not taken.
Administration:
Manufacturing Company especially RMG industry is required to
strong administration. Without proper administration timely export meet up is very tuff. Then the company has to export the items by air shipment instead of sea shipment. Then company has to give loss due to air shipment. Administration department is monitoring the production process simultaneously other administrative works. There is no administrative manpower in head office. All administrative men power are working in factory. Project head is also administration head. Administration department is monitoring the welfare of the workers. Administration departments are following the compliance of buyer requirement. Buyer requirement is preconditions for getting the order. If the company is not followed the buyer requirement then the garments department will not get any order. Compliance of buyer requirement maintained is very tuff. These tuff works are performed by admin.department. Besides the above any conflict arises in production, Accounts, R & D and Human resources then admin.department is meeting that problem. Administration department is working as like as eyes, hands and legs of the company. Here eyes means oversee visible issue of the company. By eye any man can see or realize the items which are essential or not. Administration department of MKDL is working as like as eye by this way. Hands are very essential items of the human body. Without hands human body is useless but that way MKDL is useless without administration department. Same way administration department of MKDL is working as like as leg of the human body. Administration department of MKDL keeps proper role developing the organization. Organogram of MKDL is as under: Executive Director / Project Head (Admin.)
Manager (Admin.)
Executive ( Admin)
Manager (Admin.)
Executive ( Admin )
Executive (admin.)
Fig 04: Organogram of Administration.
Conclusion: MKDL is knit composite unit which located at EPZ. It is publicly traded company that was gone in IPO in 1994.Its corporate office at 7, South Avenue tower, Gulshan Avenue, Gulshan, and Dhaka. Its share department is at Motijheel C/A, Sara tower. Its paid up capital is 5 crores and listed with CDBL in 2005. Share department is individual other than Accounts & Finance department. Now MKDL is maintaining share department electronically. MKDL is trying to follows the corporate governance guideline as per SEC and Company is also trying to follow rules and regulation of the regulatory body as like as SEC, DSE, BEPZA rules, companies act requirement and any other laws. Company’s Finance & Accounts departments are controlling from registered office at 7, South Avenue tower, Gulshan Avenue, Gulshan, Dhaka. One of the executive directors who is functioning like CFO to monitor financial matters, bank and other payments. MKDL has separate petty cash accounts under supervision of Assistant manager (Accounts & Finance) who is staying in factory to meet up and control the factory related expense. HRD and administration are now burning issue. If the mentioned department is not strong then the company is going to loose day by day. HRD of MKDL is strong undoubtedly because their selection of manpower and employees turnover is too low. If any post is
vacated due to resigned or any other reason then the HRD is going to fill up the vacated post quickly. Employees are given increment considering the HR policy of company. Administration is controlling from factory office. Project head is also administration head of MKDL. Management is following BEPZA rules for administration and above all control the facts & factors from factory.
Part Six Findings and Comments of the Study: The main purpose of the internship report is to study the good corporate governance in Mithun Knitting and Dyeing (CEPZ) Ltd as well as role, responsibility and function of the company Secretary. In this report, I tried to focus my practical experience and activities relating to the Corporate Governance Notification of SEC. However I am recommending development and improvement in the following areas: •
To provide due scope and assistance to the Company Secretary to perform the jobs assigned by the statue and the Board.
•
The monitoring system of inter department should be improved.
•
A better modified system of IT department of company should be installed prompt service to the clients.
With the fulfillment of the above recommendations, Mithun Knitting and Dyeing (CEPZ) Limited would become a corporate of complete good governance.
Part Seven Bibliography 1. Hand book of company Secretary 2.
Annual Report of Mithun Knitting and Dyeing Ltd
3.
Different journal
4.
Website
5.
Companies Act, 1994
6.
Corporate Governance guideline as per circulated through SEC