Liquidation or Winding up a company in Bangladesh | Solvency declarance, Board meeting, declaration filings| Everything you need to know.
Tahmidur Rahman, Director and Senior Associate
12 Nov 2019
This post in will explain in details about the process of Liquidation or winding up a company in Bangladesh – This article will explain the step by step process of winding up a company office in Bangladesh, Declaration of solvency , accounts and audit, extraordinary general meeting, declaration of solvency and everything you need to know and to be aware of.
Table of Contents
Liquidation or Winding up a company in Bangladesh- Find the subsections below, If you want to jump through specific sections instead of reading the whole article.
- What is Liquidation or winding up? How Liquidation or winding up works?
- 1 Company Liquidation or Winding Up processes in Bangladesh
- 2 Liquidation or Winding Up by the Court
- 3 Voluntarily Winding up
- 3.1 Steps by Step process of voluntary Winding Up
- 3.2 Step One: Drafting documents for Winding Up
- 3.3 Step Two: Submission to RJSC
- 3.4 Step Three: Pass Special Resolution
- 3.5 Step Four: Appointing Liquidator
- 3.6 Step Five: Final Report by Liquidator
- 3.7 Step Six: Documents filing to RJSC
- 3.8 Step Seven: Petition filing to Court for Liquidation or Winding Up of a company in Bangladesh
- 4 Government fees for Company Winding Up Process
- 5 LEGAL ADVICE ON WINDING UP AT Tahmidur Rahman| TR Barristers in Bangladesh
What is Liquidation or Winding up a Company? And how a Liquidation or winding up works?
Winding up is the process of dissolving a company. A business organisation stops doing business as normal when it winds up. Its conventional aims are to sell off stock, pay off creditors and transfer to partners or shareholders any remaining assets. The term is used mainly in UK where liquidation is synonymous with the process of turning assets into cash. In other terms, this mechanism generates a monetary fund in which a business pays its debts, outstanding bills, and splits the remainder and distributes to shareholders, members of the corporation, investors, or any other investor. A receiver may be designated to control such asset distribution (known as “Liquidator”) process.
Winding up a business is a legal process regulated by company laws of Bangladesh as well as a company’s AoA (Articles of association) or partnership agreement. Winding up can be compulsory or voluntary and can apply to publicly and privately held companies. (Liquidation or Winding up a company in Bangladesh)
Process of Liquidation or Winding up a company in Bangladesh
Before we deep dive into the process of winding up a company in Bangladesh, it is pertinent to note the term used here is Company but not businesses, as sole proprietorships or partnership business in Bangladesh do not follow the equivalent pathway or practice such as liquidation or winding-up. Therefore, to continue with the liquidation process one must have or have an operating company, properly incorporated / registered under Bangladesh law.
Under the company law 1994, there are three modes of winding up a company in Bangladesh. The winding up of a company may be either:
- by the court or
- voluntarily or
- Subject to the supervision of the court.
Who can file the petition of winding up in Bangladesh?
A winding-up petition can be filed jointly or separately by a creditor, the business or the company (i.e. shareholders) or lender under section 245 of the Companies Act 1994. In the event of a company winding up, section 235 of the Companies Act notes that each of the company’s current and former owners will be liable to contribute to a amount adequate to cover the company’s debts, liabilities, costs and liquidation expenses. Section 237 describes the term contributory; it means that in case of wound up each individual is liable to contribute to the assets of a corporation. (For Liquidation or Winding up a company in Bangladesh)
Hence to summarise,
A petition for winding up can be filed by:
- Creditor or,
- the Company (i.e. shareholders) or
- Contributory (who contributes to a companies’ assets in paying the debts and costs of the company), together or separately.
Winding up a company by the court in Bangladesh
Winding Up of a company by court may be done in certain circumstances which are:
- if the company through the special resolution decided that it must be winded up by the court; or
- if default is made in filling the statutory report or in holding the statutory meeting; or
- if the number of members reduced below the required number as per the Company Law; or
- the company is incapable of paying its debts; or
- if the court is of opinion that it is just and equitable to wind up the company.
Liquidation or winding up a Company by Court- Process in Bangladesh
Company winding up or Liquidation process in Bangladesh by court has been discussed very briefly in order to give an idea of the process.
Step one: Filing Petition to Court
In order to wind up a company by the court, a petition has to be filled the company court of High Court Division of Supreme Court . It is to be noted that winding up of a company by the court shall be deemed to commence from the time of presentation of petition for winding up. Upon hearing the application the court will pass an order for winding up of the company.
Step two: Notification to registrar
In issuing a winding-up order, the petitioner and the corporation are obliged to file a copy of the order with the Registrar within 30 ( thirty) days from the date of the request. The Registrar shall register a summary in his company related books upon filing a copy of a winding-up order. The registrar then notifies the official Gazette that such an order has been made. Such an order shall be considered to be a discharge notice to the company’s employees, except when the company’s business is continued.
Step three: Appointment of Liquidator
The court will then appoint an official liquidator and the liquidator will perform its duties as per the Companies Act 1994. In case of winding up by the court, all the property and effects of the company shall be deemed to be in the custody of the Court as from the date of the order for the winding up of the company.
Step four: Information recorded with RJSC
Once a company’s affairs have been completely wound up, the Court shall make an order to dissolve the company from the date of the order, and the company shall be dissolved accordingly. Official liquidator shall report the order to the registrar within 15 (fifteen) days of the order. The registrar shall record a minute of the company’s dissolution in his books.
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Voluntary Liquidation or a winding up a company in Bangladesh
A company may be winded up voluntarily:
- when the period, if any, fixed for the duration of the company by the articles expires or any event occurs for which the articles provides that the company is to be dissolved and the company in general meeting has passed a resolution for winding up voluntarily;
- if the company resolves by special resolution that the company be winded up voluntarily;
- if the company resolves by extraordinary resolution to the effect that it cannot by reason of its liabilities continue its business, and that it is advisable to wind up.
It is to be noted that commencement of voluntary winding up shall be deemed to commence at the time of the passing of the resolution for voluntary winding up. (Liquidation or Winding up a company in Bangladesh)
Company Winding up process subject to Court in Bangladesh
When a company has by special or extraordinary resolution resolved to wind up voluntarily the court may make an order that the voluntary winding up shall continue but subject to supervision of court and such terms as the court thinks just.
Section 242 of the Companies Act 1994 takes into account whether a corporation is found to be unable to pay its debts. This will be the case if a creditor to whom the company is indebted for a sum and the company fails to pay the sum for three weeks or if the execution or other proceedings issued under a decree or order of any court in favor of a company creditor are returned unsatisfied in whole or in part or if it is demonstrated to the court’s satisfaction that the company is unable to pay its debts and the court is to take account of them.
Section 316-321 of the 1994 Companies Act deals with turning up being subject to court oversight. If a company has agreed to wind up voluntarily through special or exceptional means, the court may make an order that the voluntary winding up must proceed but be subject to court oversight and such conditions as the court considers appropriate. Where an order for winding up is made subject to supervision, the liquidator may exercise all the powers, subject to any limitation imposed by the court, as if the company were being wound up voluntarily entirely. (Liquidation or Winding up a company in Bangladesh)
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Steps by Step process of voluntary Winding Up a Company in Bangladesh
This is the liquidator ‘s responsibility in any voluntary winding-up to settle the company’s debts and change the creditors’ right among themselves. Here is the comprehensive step-by – step method of voluntary wind-up of a bangladesh company.
Step One: Drafting documents for Winding Up
The first step on the process of winding up is to prepare documents. The documents that need to be prepared are:
- Declaration of Solvency, (which includes information such as the company has no debts among other things) and
- Profit and Loss Account and
- Audited Balance.
The above mentioned documents will have to be approved by the majority directors of the company.
Step Two: Submission to RJSC
The next step is to file the approved Declaration of Solvency to the RJSC within 5 (five) weeks from the approval by directors.
Step Three: Pass Special Resolution
The third step requires the Extraordinary General Assembly to pass a special resolution. This is to approve the company’s decision to wind down and the liquidator appointment. It should be noted that the meeting ‘s content is also to be filed with the RJSC. The special resolution will then be published in the official Gazette, and in a newspaper circulated in the district where the company’s registered office is located. It will be achieved within 10 ( ten) days of the special resolution passing it.
Step Four: Appointing Liquidator
Once the chosen liquidator has been approved by the extraordinary general meeting and the liquidator has accepted the appointment, such must be notified to the RJSC. In addition, the Deputy Commissioner of Taxes will also be informed of the same within 30 (thirty) days of the said appointment.
Step Five: Final Report by Liquidator
At this stage the liquidator need to prepare a Final Account. The Final Account must have the details of how the winding up has been conducted and the assets distributed. Thereafter, the liquidator will call an extraordinary general meeting and the notice for that must be circulates by advertisement in the official Gazette, and in a newspaper. Such a notice must be given not less than one month before the meeting.
The special resolution will be passed in the extraordinary general meeting with regards to the disposal of the books and papers of the company.
Step Six: Documents filing to RJSC
Lastly, a final meeting must be hold and a return of the meeting must be submitted to the RJSC upon which the company will be winded up. The submission must be made within one week of the meeting.
Step Seven: Petition filing to Court for Winding Up
For voluntary winding up, the petition to the court is made at this stage. All the documents relevant to the winding up of the company are submitted to the court. The court being satisfied, declares that the company has been dissolved. This stage is essential to avoid any allegation of fraud later on.
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- Step by Step Process of Registering a Company in Bangladesh
Liquidation or winding up a company in Bangladesh services in TR Barristers in Bangladesh
Tahmidur Rahman | TR Barristers in Bangladesh, a leading Company law firm can provide following the legal services: The Law firm will assist in arranging the actual consent and interest of each company share. Furthermore, TRW will provide a complete road map for winding up processes. Team TRW may also help in the disposal of company properties and make use of the proceeds to pay creditors. In addition , the team will assist in holding creditors’ meetings, settling legal disputes and settling all the company’s pending obligations. TRW will be responsible for sending the documents to RJSC and preparing all documents in Bangladesh for the termination or liquidation of the company. On top, the company law department will provide the complete legal services in relation to Company winding up or Liquidation process in Bangladesh.
For queries or legal assistance, please reach us at:
E-mail: [email protected]
Phone:+8801847220062 or +8801779127165 (WhatsApp also available)
Liquidation or Winding up a company in Bangladesh.
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