Silver company Pvt Ltd was introduces in 1993 by Mr. Bari Rushdhi a prominent entrepreneur in Maldivian shipping industry. Since 1993, Silver Company has been privilege in handling several shipping lines, fright forwards and logistic companies in the world. Company has one office in Male’ and two branch office in India and Thailand. Around thirty employees work in the company. In company there are two boards of directors, they are Mr. Mohamed Nabeel and Mr. Imran Rushdhy.
The company Managing Director is Mr. Mohamed Nabeel and he is also the chairman of the Company. In the company they do not have an audit committee but they have a company secretary. Procedure for Silver company becoming public company In the company act it states that a public company can be registered if the persons forming the company consent to buy share of at least 1 million Maldivian rufiyaa in value and pay that amount to the company and submit the evidence of payment to the register.
(Ministry of Economic Develepment, 2011) According to company act of Maldives if a private company wants to become public company, company should pass a special resolution from the board of directors. When the special resolution is passed
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-Special resolution passed from the board to alter memorandum and article of association. -The memorandum and articles of association of the company after conveying them into compliance with the memorandum and articles of association of a public company as agreed in this Act. -The prospectus. ( public offering letter) (Ministry of Economic Develepment, 2011) Silver company has to change their company name. Now the company name is Silver company Pvt Ltd but company name has to change Silver company Plc.
To list in the stock exchange Silver Company has to follow Maldivian stock exchange listing procedures. -The company is encouraged to obtain assist of licensed dealing companies for support involving in listing. (Maldives Stock Exchange, 2013) -Silver company has to alter Company Memorandum and Articles of Association accordance with the Maldives Stock Exchange listing rule and CMDA codes. Company memorandum and article should tally with the listing rules and CG codes.
(Maldives Stock Exchange, 2013) -It is necessary for silver company to issue a prospectus in fulfillment with the Companies Act and the rules in the Companies Act and the Listing Rules of Maldives stock exchange (Maldives Stock Exchange, 2013) -The company will have to submit an application for initial listing with the requisite documents Specified in the Listing Rules of Maldives stock exchange (include Certificate of Incorporation & Certificate to commence business if they have, Memorandum and Articles of Association, a copy of the signed agreement with Maldives Securities Depository for demat trading, etc), with the prospectus to Maldives stock exchange & CMDA for evaluate and authorization. (Maldives Stock Exchange, 2013) -After company gets the approval from Maldives stock exchange and CMDA Company have to send it to registrar for their approval. (Maldives Stock Exchange, 2013) -The Silver company has to make its prospectus and application forms public at least 14 market days ahead of the date of opening of the subscription list. In the occurrence of an over-subscription, the company shall allot the shares in unity with the policy defined in the prospectus.
(Maldives Stock Exchange, 2013) -Direct announcements must be prepared to the MSE of information that could have a material effect on the price of the listed security. Examples of such information would include: ?A decision to either assert or to not declare a dividend. ?Any decision to alter the capital structure of the company, including decisions regarding Rights and Bonus issues. ?Alteration to the Board of Directors, Company Secretary, Registrars or Auditors of the company. (Maldives Stock Exchange, 2013) -Listed companies are required to stick to the Companies Act requirements pertaining to Annual Reports. However, the Listing Rules of the MSE involve the Annual Report to make accessible some additional information.
The Annual Report must be dispersed to shareholders within 6 months of the end of the financial year. (Maldives Stock Exchange, 2013) Companies listed on a Second Board are required to circulate the Annual Report to shareholders within 7 months of the end of the financial year. (Maldives Stock Exchange, 2013) -Once a company is listed, it is compulsory that buying and selling of its shares take place through the Stock Market. (Maldives Stock Exchange, 2013) -If a company has listed a particular group of security, any further issue of securities of the similar group is only permitted once the company submits an extra listing application and such application has been approved by the CMDA. (Maldives Stock Exchange, 2013)
Evaluation on restriction and Challenges when applying CG codes -Internal Auditing One of the mandatory provisions of CG code is internal auditing. According to the code all listed companies must have internal auditing task within the organization. These internal auditors should approved by the audit committee. In the code it also states that internal audit department should have a wide range of work investigation of the company and the auditors should be independent from the management. (Capital Market Development Authority, 2012) Apply the above provision will be a big challenge for the silver company. In Maldives there are limited authorized auditors and hiring a good auditor will be a difficult task for the company.
Silver company is a shipping company so they have to get auditors those who have knowledge in the industry otherwise, company will face difficulties in dealing with the auditors and it takes time for auditors to get proper knowledge in the industry. Finding proper auditors will be a challenge for the company. In the provision it also says that there should be a wide range of investigation on the work process. To investigate in a wide range auditors need to check documents and employees have to give information to them this is a challenge for the company because Silver Company is a shipping company and they have a huge work load in the organization. Internal auditing function will increase company work load and they have to spend time on searching documents. According to Saleem (2013) companies are complaining about difficulties in finding appropriate auditors.
According Rishan( 2012), only two companies submitted 2011 last quarter’s reports within the time period and other companies has requested CMDA to increase their time limit. According to Saleem (2013), companies reasons for not to publishing financial reports were due to delay in preparing audit reports and getting financial details of subsidiary companies and financial details of their branches. This has concluded that companies are having difficulties in conducting audits. -Disclosure In a mandatory provision of CG code it states that companies financial statements and accounts has to be prepared in accordance with full international accounting standard.
(Capital Market Development Authority, 2012) This will be a big challenge for the company because they have to prepare quarterly reports and have to disclose those reports within the standard time period. Companies have to disclose three months audit reports within thirty days period. According to Rishan(2012), only two companies submitted 2011 last quarter’s reports within the time period. Other companies CMDA to increase their time limit. Disclosing financial reports had become companies a big challenge. Companies main reasons for not to disclosing information were due to pending audit reports, difficulties in preparing subsidiary companies and company branches information.
Silver company they have a branch office in India and Thailand, this will be a restriction to Silver company in preparing quarterly financial report on time because they have to get these branches audited and they have to gain financial information from those branch. Some companies main reason for delay in financial report is delay in preparing audit reports this will be a challenge for silver company because there are limited auditors available and there are delays for them to prepare audit reports. -Effective Board The size of board should be large enough to embrace directors with diverse expertise and experience to go with the particular requirements of a company and its business. As a guide, the international benchmark on board sizes range from 7 to 10 directors, depending on the size of the company.
(Capital Market Development Authority, 2012) One of the mandatory provision in the CG code is company must have an effective Board of directors. (Capital Market Development Authority, 2012) In another provision in the CG states that, when nominating new directors, the Nominating Committee should consider the mix of directors’ characteristics, experiences, diverse perspectives and skills that is most appropriate for the company. (Capital Market Development Authority, 2012) There is also a provision in the CG code saying that, The Board must ensure that the members of the Audit Committee are duly qualified with at least two (2) members with accounting or related financial expertise or experience.
(Capital Market Development Authority, 2012) Apply those provisions in selecting those board members will be a challenge for the company. Silver company is shipping company so that shipping industry is not a broad industry in Maldives. There are fever qualified people in the industry so that recruiting directors will be a challenging task for the company. A BML spokesperson told Minivan News that the failure to have held its AGM had been the effect of delays in appointing board members to the company. (Merrett, 2012). So that, this address that Maldivian companies are facing difficulties in appointing high qualified members to the board. -Shareholder communication
In the CG codes it says that companies must engage in usual, helpful and fair communication with shareholders at general meetings or throughout other means. (Capital Market Development Authority, 2012) To have a fair communication with the share holder is a challenge for the company because company does not have a company website to upload information. Company will be facing difficulties in publishing financial reports if the company do not have website. Mostly companies upload there financial information top the website so fairly shareholders can get access to those documents any time they want. Providing fair communication will be a challenge for the company. Recommendation -Installing a proper documentation system
By installing a proper documentation system, company cans faster the auditing process. If the auditors can easily get accessed to the documents it can make auditing process faster. To have proper documentation System Company can scan documents and put in a shared server so that auditors can easily access to documents. This will make company employees time also much easier. The biggest concern of the auditors is difficulties in getting proper information but by installing a good documentation system, auditors can get the right information easily. -Installing an accounting system Installing an accounting system like Acc track, company can easily prepare financial details.
By using a same system in other two branches located outside the country, company can easily access to their financial information. Company can install a system in which it has a feature that those records enter by other branches can been seen from main branch. So easily company can prepare financial reports of those branches. -Hiring a qualified accountant to the company According to CG Codes Company have to prepare financial statements accordance with international standard so that company has to hire qualified accountant to the company so that company can make financial statement in relevant standard. -Educating and training people to the industry
In the industry there is minute number of qualified people so Silver Company can provide education facilities to the individuals and they can educate people to the industry. While providing education facilities they can provide causes which are most relevant to the industry. They can provide causes in relevant to accounting field and shipping field. Company also cans aware industry employees to corporate governance code by providing them training on corporate governance. Company can provide these training by joining with CMDA. By providing those education facilities company can easily get the qualified directors. -Developing a Company website To fairly communicate with Shareholders Company can use company website.
Company can upload financial documents and other necessary information’s to the website so that shareholders can freely get access to those documents at any time they want. Conclusion Silver company Pvt Ltd was introduces in 1993 by Mr. Bari Rushdhi a prominent entrepreneur in Maldivian shipping industry. In company there are two boards of directors, they are Mr. Mohamed Nabeel and Mr. Imran Rushdhy. The company Managing Director is Mr. Mohamed Nabeel and he is also the chairman of the Company. In the company they do not have an audit committee but they have a company secretary. According to Company Act silver company should have a share capital of MVR 1million to become a public listed company.
In company act its states that company should pass a special resolution from the board to go for public. Company has to alter the memorandum and article of association . with the document company has to submit prospectus. Company also has to follow listing rules of Maldives stock exchange to issue shares to public. Company has to submit prospectus to the CMDA and MSE and after their approval company have to submit documents to the registrar. Company has to apply CG codes to be a public listed company. There are challenges company will face while apply those codes. Company will face a challenge in vision of internal apply the provision of internal auditing.
Company will be facing difficulties in appointing auditors due to limited auditors available. Company will also face challenges in publishing quarterly financial reports because company has two branches in different two countries. In the CG codes it says that company should appoint qualified members to the board. This will be a challenge for the company because there are few qualified people in the shipping industry. Company also will face challenge in providing fair communication with the share holder because company does not have a company website. Recommendation for silver company to overcome’s from those challenges are providing educational opportunities to employees in the industry to get qualified directors.
To overcome from challenge of preparing quarterly reports on Time Company can install an accounting system which will provide information of different branches to the accountant and also to overcome from that Problem Company can hire qualified accountants. To make audit reports company can install proper documentation system to make easy for auditors to prepare audit reports. I also recommend company to develop a company website to share company information to the shareholders fairly. Reference Capital Market Development Authority. (2012). Corporate Governance Code. Maldives Stock Exchange. (2013). Maldives Stock Exchange. Retrieved from http://www. maldivesstockexchange. com. mv/listing. php. Merrett, N.
(2012). Bank of Maldives and MTDC at risk of trading penalties over AGM delays: Stock Exchange. Retrieved from http://minivannews. com/society/bank-of-maldives-and-mtdc-at-risk-of-trading-penalties-over-agm-delays-stock-exchange-44383. Ministry of Economic Develepment. (2011). THE COMPANIES ACT OF THE REPUBLIC OF MALDIVES. Retrieved from http://www. trade. gov. mv/downloads/4dd0de11494d6_Unofficial%20Translation%20of%20The%20Companies%20Act%20of%20Maldives%20%28English%29. pdf. Rishan, A. (2012). http://www. haveeru. com. mv/dhivehi/business/116618. Retrieved from haveeru Daily. Saleem, M. (2013). Corporate Governance. (M. Irufaan, Interviewer)