PART - II 
INCORPORATION OF A COMPANY AND MATTERS INCIDENTAL THERETO 
 

Mode of Forming an Incorporated Company 

3.

i.  Any two  or more persons associated for any lawful purpose may, by  subscribing  their  names  to  an  Article  of  Incorporation  and complying with  the provisions of this Act in respect of registration, form an  incorporated company having the liability of its shareholders limited by  the Articles  to the  amount, if any, unpaid on the shares held by  the, provided  that,  a  non-Bhutanese  person,  including  a foreign company,  may not  become a subscriber to the Articles without the written approval of the Government. 

ii. The  requirement of  a minimum  number of two persons shall not be applicable in case of Government Companies. 

Requirements as to Articles 

4.
i. The Articles shall be consist of the following clauses: 

a.  name clause, 
b.  registered office clause, 
c.  objects clause, 
d.  capital clause, 
e.  limited liability clause, and 
f.  regulations clause. 

ii. The Articles shall be in the form given in Schedule-I or in a form as near thereto as circumstances admit. 

iii. The  Articles shall be printed, divided into paragraphs, numbered consecutively, have  judicial stamps  affixed and  shall be  signed by each subscriber,  who shall  add his  name, address,  description  and occupation, if  any, in the presence of at least one witness who shall attest the  the signature  and shall  likewise add  his name, address, description and occupation, if any. 

iv. Any  alteration to the Articles involving change in the provisions required to  be included  in the  Articles under  Section 4(i) (a)-(e) above shall  be done  with the  approval of  the shareholders  and the Department, and  the alternation  shall be  published  in  a  national newspaper within thirty days thereof. 

Name 

5. i.  The name  clause of  the Articles shall specify the name of the company as approved by the Department. 

ii. A  change of  name shall  not affect  any right or obligation of a company, or render defective any legal proceeding by or against it. 

Registered Office 

6. The  registered office  clause of  the Articles  of a company shall give the name of the city, town or village where the registered office of the company is situated. 

Service of Documents 

7. A  document may  be served  on a  company or  an officer thereof by sending it  to the  company or officer at the registered office of the company by registered post or by leaving it at its registered office. 

Publication of Name and Address of Registered Office 

8.

i.  Every company  shall paint or affix its name and address of its registered  offices   outside  its  every  office  in  easily  legible characters in Dzongkha. 

ii. Every  company shall  mention in  all its business letters, in all its letter  heads, invoice,  orders for  money or goods and in all its notices, Share Certificates and other publications, the following. 

a. its name, 
b. logo, 
c. address of its registered office, 
d. the  fact that  it is  incorporated in Bhutan and, in the case of a Government  Company,   the  fact  that  it  is  wholly  owned  by  the Government, or, in case of a Joint Sector Company, the fact that it is a Joint  Sector Company, or in the case of a Private Company, the fact that it is a Private Company. 

iii. Every  company shall  have its  name mentioned  in all  bills  of exchange, promissory  notes,  endorsements,  cheques  and  letters  of credit signed by or on behalf of the company. 

i. The  objects clause  of the  Articles shall specify the objects for which the company is incorporated and the objects shall be lawful. 

ii. Subject to the provisions of this Act and to other applicable laws a company  shall have  all  powers  necessary  an  incidental  to  the carrying out of the objects specified in the objects clause. 

iii. Actions  taken by a company which are outside or beyond the scope of the  objects given  in  the  Articles  of  Incorporation  shall  be unlawful and the Directors and officers of the company shall be liable to penalty as prescribed in section 80. 

****pital 

i. The  authorised capital  of each company shall be prescribed in the capital clause of the Articles. 

ii. The  authorised capital of a company shall consist of two kinds of shares, namely: 

a. Ordinary  Shares having  equal face  value that  shall entitle  the holder thereof  to the right to vote on every resolution placed before the General Meeting of the company. 

b. Preference  Shares that  shall confer  on the  holder  preferential rights as  to payment  of dividends at a fixed rate on a cumulative or non-cumulative basis,  or repayment  of capital in case of liquidation of the  company, or  the right  to participate  fully or  to a limited extent in  any surplus  which may  remain after the entire capital has been repaid. 

Limited Liability 

1. i.  The limited  liability clause  of the Articles shall state that the liability of the shareholders is limited. 

ii.   The liability of a shareholder shall be limited to the extent of shares issued by the company and accepted by the shareholder. 

Regulations 

12. The  regulations clause of the Articles shall, inter alia, provide for the following matters 

a. any  specific right  that may  be conferred  on, or  any particular requirement,  condition   or  other   matter  to  be  fulfilled  by  a shareholder or a group of shareholders; 

b. the  manner in  which the business of the Board shall be transacted and the procedures to be followed at Board meetings; 

c. the delegation of powers and functions by the Board to the Managing Director, other Directors and officers of the company; 

d. the  constitution and  management of staff and superannuation funds for the employees of the company; 

e. the form and manner in which contracts binding the company shall be executed; 

f. the  form in  which the balance sheet of the company shall be drawn up and  in which  the accounts,  including annual  accounts, shall  be maintained; 

g. generally for the efficient conduct of the business of the company. 

Registration 

13. i.  A  company  shall  file  with  the  Department  the  following documents in connection with the registration of the company: 

a. the Articles of Incorporation, 

b. names  of the  first Directors  (including  the  Chairman  and  the Managing Director) together with their consents in writing, 

c. a  declaration by  the proposed Managing Director (or secretary) of the company  or any other person specified by the Department from time to time  stating that  the Articles comply with the provisions of this Act  or   any  rule   made  by   the  Department  in  connection  with registration. The  department may  on scrutiny accept such declaration as sufficient evidence of compliance. 

ii. The documents referred to in clause (i) above shall be accompanied by a fee as prescribed by the Department from time to time. 

iii.  If  the  Department  is  satisfied  that  all  the  requirements aforesaid have  been complied with and that the company is eligible to be registered  under this  Act,  it  shall  retain  and  register  the 
Articles and certify in writing that the company is incorporated under this Act. 

iv. A  Certificate of  Incorporation issued by the Department shall be in the  form given  in Schedule  -  II  and  shall  be  deemed  to  be conclusive  evidence   of  registration   and  compliance  of  matters precedent and incidental thereto. 

v. The  Articles shall  from the time of registration bind the company and the  shareholders thereof  to the  same extent  as if  it had been signed by the company and by each shareholder and contained convenants on its and his part to observe all the provisions of the Articles. 

vi. From  the date  of incorporation  mentioned in  the Certificate of Incorporation, such  of the  subscribers of  the  Articles  and  other persons as may from time to time be shareholders of the company, shall be a  body corporate  by the  name contained  in the Articles, capable forthwith of  exercising all  the functions of an incorporated company and having  perpetual succession  and a  common  seal  with  its  name engraved thereon and the company may sue or be sued in its own name. 

Effect of Registration

14.

i.  Upon registration,  a company  shall, without  prejudice to an power under the law, have powers, inter alia, to do the following acts in its own name: 

a. to enter into contracts with any other person in the same manner as an individual; 

b. to  execute, endorse  or deal  with  deeds,  negotiable  instrument including any bill of exchange or promissory note; 

c. to sue and be sued; 

d. to  purchase, sell  or deal  with movable and immovable properties; and 

e. to  empower any  person either  generally  or  in  respect  of  any specified matter as its agent or attorney. 

ii.  A   company  shall  within  six  months  from  the  date  of  its incorporation  send  to  the  shareholders  a  statement  showing  the progress made  in carrying  out its objectives and the manner in which the capital  issued by  the company till the date of the statement has been utilized.