Restructuring & Insolvency in Bangladesh — A Comprehensive TRW Guide for Foreign and Domestic Companies
Prepared by Tahmidur Remura Wahid (TRW) Law Firm — Dhaka • Dubai • London
Why this guide & who it’s for
Bangladesh is a vibrant, fast-growing market where capital costs, FX controls, and banking practices make distress management a practical discipline for boards, lenders, sponsors, and suppliers. If you are:
- a foreign investor or lender with a Bangladeshi opco;
- a Bangladesh parent with financing raised in Dubai or London; or
- a local company navigating liquidity stress, shareholder disputes, or market shocks,
this playbook explains the legal pathways, creditor dynamics, board duties, timelines, and cross-border coordination you’ll actually face — and how TRW runs these processes end-to-end across our Dhaka, Dubai, and London platforms.
Executive summary
■ Bangladesh’s core corporate distress tools live in the Companies Act, 1994 (winding-up by court, voluntary winding-up, supervision by court; plus schemes/compromises under sections 228–229 for restructurings and mergers/demergers), the Bankruptcy Act, 1997 (bankruptcy framework), and the Artha Rin Adalat (Money Loan Court) Act, 2003 (specialized loan recovery track for banks and NBFIs). (ICSI, International Bar Association, Department of Printing and Publications, Bangladesh Laws)
■ Secured lenders in practice often prefer Artha Rin recovery and enforcement while pursuing parallel settlement/rescheduling under Bangladesh Bank policies (including historic “one-time exit” and rescheduling regimes). These supervisory levers shape real-world negotiating leverage and timing. (Bangladesh Laws, BB, Daily Observer)
■ Court-supervised restructurings via scheme of arrangement (s.228–229) can be powerful where creditor classes are organized and disclosure, valuation, and sanction strategy are tightly managed. This is also the bridge for mergers/demergers to right-size balance sheets. (International Bar Association, LafargeHolcim Bangladesh PLC.)
■ Winding-up grounds include inability to pay debts and “just & equitable” situations, with “bona fide dispute” defenses common. Expect creditor class fights, valuation contests, and liquidator oversight. (Mahbub Law, Tahmid Ur Rahman)
■ Bangladesh has not adopted the UNCITRAL Model Law on Cross-Border Insolvency. Cross-border recognition therefore relies on comity-based strategies and deal engineering via security, governing law, intercreditor arrangements, and parallel filings (e.g., Dubai, London). (Academia)
■ In Dubai/UAE, Federal Decree-Law No. 51 of 2023 (in force 1 May 2024) modernizes restructuring/bankruptcy and — crucially — the UAE is operationalizing a dedicated Bankruptcy Court (2025), tightening timelines and tools for preventive settlements and court-led restructuring. (King & Spalding, UAE Legislation, Charles Russell Speechlys)
■ In London/England & Wales, the UK toolkit features the Part A1 moratorium (debtor-in-possession breathing space), Part 26 schemes, and the Part 26A restructuring plan (with cross-class cram-down). These are globally credible platforms to restructure English-law debt of Bangladeshi groups. (Legislation.gov.uk)
TRW’s advantage: We run Bangladesh processes in Dhaka while structuring recognition and parallel solutions through Dubai (UAE) and London (UK) counsel within the same team, solving the real constraints: FX approvals, bank supervisory interactions, security perfection/enforcement, public-sector counterparty risk, and timeline choreography across three legal systems.
Bangladesh legal framework — What actually works
1) Core statutes & forums
■ Companies Act, 1994 — Modes of winding-up (by court, voluntary, supervision) and compromise/arrangement (s.228–229) for restructurings, mergers, and demergers. High Court Division supervises sanction. (ICSI, International Bar Association)
■ Bankruptcy Act, 1997 — Bankruptcy adjudication framework and the role of the court and official receiver/trustees. In practice, corporate distress is more often navigated through Companies Act tools and creditor recoveries under sectoral regimes. (Department of Printing and Publications)
■ Artha Rin Adalat Act, 2003 — Specialized Money Loan Courts for banks/NBFIs to recover loans quickly; these often run in parallel with settlement talks and shape restructuring leverage. (Bangladesh Laws)
■ Bangladesh Bank — Rescheduling/exit policy setting (historic waves in 2019–2024); FX approvals for external debt/equity conversions and cross-border settlements under FEPD circulars. (BB, Daily Observer)
Practical point: Even when a board is focused on a consensual restructuring, secured lenders can and do file Artha Rin suits while you negotiate. Your plan must price and sequence that litigation risk into standstill language and milestone-driven term sheets.
2) Pre-insolvency playbook (8 must-dos)
■ Liquidity map (13-week cash flow), including LCs, customs/VAT choke points, payroll, and critical vendors.
■ Security audit: registration, stamping, ranking, negative pledge, share pledge, land/machinery hypothecation — fix perfection gaps early.
■ Regulatory early touch with Bangladesh Bank (if external debt/FX involved) to roadmap approvals. (BB)
■ Lender alignment: intercreditor realities in Bangladesh often hinge on lead bank dynamics — run a steering committee and hold-out strategy.
■ Board governance: minuted solvency assessments; avoid new preferences/under-value transfers; manage related-party exposure.
■ Tax & withholding: NBR positions on debt-equity swap, haircuts, and interest deductibility affect feasibility.
■ Communications & disclosure: prepare scheme/rescheduling-grade information (business plan, valuation, classes).
■ Artha Rin risk plan: contingency pleadings and settlement ladders if filings land mid-process.
3) Schemes, mergers & demergers (Companies Act, 1994)
Schemes under s.228–229 can restructure debt and equity (haircuts, maturities, security upgrades, new money, governance), or amalgamate/demerge businesses to salvage value. The High Court Division convenes meetings, oversees class voting, and sanctions if the scheme is fair and lawful. Listed and regulated entities add consents (BSEC, Bangladesh Bank). (International Bar Association, BB)
Winning tactics:
■ Class architecture that survives challenge (secured vs unsecured; trade; landlord; tax).
■ Robust valuation with sensitivity to FX and market-comparable constraints.
■ Lock-up agreements with key creditors to anchor votes.
■ Regulatory choreography (BB/BSEC) built into long-stop dates and CPs.
Use cases TRW runs:
■ Bank club deal (term + working capital) into a three-tier structure: super-senior new money, reinstated secured, and compromised unsecured with equity warrants.
■ Demerger to isolate loss-making verticals and secure vendor support for the profitable core. (LafargeHolcim Bangladesh PLC.)
4) Winding-up & liquidation: when rescue is over
Grounds: inability to pay debts (including failure to satisfy statutory demand and unsatisfied execution), persistent business suspension, and just & equitable circumstances. Bona fide dispute about the debt can defeat a winding-up petition at threshold. Expect liquidator appointment, asset realization, and distributions per statutory priority. (Mahbub Law, Tahmid Ur Rahman)
What boards must manage:
■ Trading in twilight — stop loss-making trades without a path to rescue; avoid new preferences.
■ Books & custody — preserve accounting, tax, and HR records; cooperate with the liquidator.
■ Stakeholder comms — scripted updates to reduce rumor-driven supplier runs.
5) Artha Rin Adalat (Money Loan Court) — why it matters even in a restructure
Banks/NBFIs can file a specialized recovery suit, attach collateral, and move execution faster than ordinary civil courts. That leverage drives early settlements or parallel litigation during your scheme talks. Expect certificate cases, auction processes, and interlocutory skirmishes. (Bangladesh Laws)
TRW tip: Negotiate interim forbearance tied to milestones (data-room access, IBR delivery, independent monitor) to pause escalation while your scheme architecture hardens.
6) Bangladesh Bank overlays you cannot ignore
Rescheduling/one-time exit policies have periodically eased down-payments and extended tenors to clear NPLs; macro shifts in 2024–2025 tightened expectations again. Any plan with external debt or debt-equity conversions will also need FEPD clearance and filings. Build regulator milestones directly into term sheets and timetables. (Daily Observer, BB)
7) Priorities waterfall (high-level)
While the exact order depends on specific statutes and security, the practical hierarchy typically sees costs of the insolvency, secured claims up to collateral value, preferential claims (e.g., certain wages/statutory dues), then unsecured, then shareholders. Your scheme or settlement should model recoveries by class and demonstrate no-worse-off outcomes relative to liquidation.
8) Governance & director duties in distress
Bangladesh law polices fraudulent trading/misfeasance, and courts will examine preferences and under-value transfers. Best practice (and TRW’s advice to directors):
■ Minute solvency assessments and advice taken (legal/financial).
■ Avoid selective payments without documented business-critical rationale.
■ Disclose related-party exposure early; recuse where needed.
■ Preserve records; plan employee communications to reduce exit risk.
Cross-border coordination — Dhaka × Dubai × London
The problem set
When groups have English-law debt (LMA term loans, notes) and/or UAE assets/finance, a purely Dhaka-centric solution often cannot bind all stakeholders. Bangladesh also has not adopted the UNCITRAL Model Law; recognition of foreign proceedings is case-by-case. Your plan must engineer recognition through contracting (governing law/jurisdiction), security location, parallel filings, and consensual lock-ups. (Academia)
UAE (Dubai) layer — fast-evolving tools
The UAE’s new Financial Restructuring & Bankruptcy Law (Federal Decree-Law 51/2023), effective 1 May 2024, repeals the 2016 regime and introduces a modern toolbox (preventive settlements, restructuring, fresh financing permissions, tighter management liability). In 2025, the UAE began operationalizing a dedicated Bankruptcy Court, signaling faster, specialized handling. Free zones ADGM/DIFC maintain their own insolvency systems. (King & Spalding, UAE Legislation, Charles Russell Speechlys)
Why TRW uses Dubai:
■ Many Bangladesh groups have UAE trade flows (suppliers, receivables, owner residency).
■ A compliant UAE restructuring can anchor moratoria and provide a court-blessed plan to pressure hold-outs, while Bangladesh scheme steps run in parallel.
London (England & Wales) layer — global gold standard
The UK Part A1 moratorium offers short, court-filed breathing space supervised by a monitor, while Part 26 schemes and the Part 26A restructuring plan (with cross-class cram-down) give court-tested, enforcement-friendly outcomes for English-law debt. When your senior documents are English-law, a UK plan/scheme can bind complex creditor stacks and re-paper intercreditors. (Legislation.gov.uk)
How we combine them:
■ Dhaka: class design + data-room + scheme track (or creditor settlement/Artha Rin standstill).
■ Dubai: preventive settlement or court restructuring to corral GCC creditors.
■ London: Part 26A plan to bind English-law lenders; then shuttle amendments downstream.
What foreign companies must be careful about (the hard truths)
1) Security reality vs paper perfection
■ Check registration/stamping status for all Bangladeshi security — unperfected security loses priority in liquidation and weakens negotiation.
■ Share pledges often require bespoke enforcement steps; plan the mechanics and timing early.
2) Parallel enforcement risk
■ Banks may file Artha Rin while you’re negotiating. Build standstill and milestones into term sheets; include an escalation ladder (forbearance → scheme vote → fallback auction timetable). (Bangladesh Laws)
3) FX controls & approvals
■ External debt restructures, equity conversions, and cross-border settlements may need Bangladesh Bank pre-clearance. Model approval lead times into your CPs. (BB)
4) Voting/class fights
■ Supplier concentrations and public-sector counterparties make for unusual class dynamics; document objectively why classes are drawn and why outcomes are fair.
5) Tax
■ Haircuts, debt-equity swaps, and withholding must be tax-modeled; missteps erode cash runway and can derail approvals.
6) Public messaging & workforce stability
■ Bangladeshi markets are relationship-driven; a communications miscue can trigger supplier freezes and key staff exits. Script coordinated updates across Dhaka, Dubai, and London stakeholders.
7) Cross-border recognition
■ Without the Model Law in Bangladesh, you can’t assume foreign orders will bite domestically. Engineer recognition via contract terms, security location, and parallel filings. (Academia)
8) Board process risk
■ Courts look for good-faith process: regular solvency monitoring, considered advice, and avoidance of preferences/under-value transfers.
Typical TRW restructuring pathways (and when to use them)
A) Out-of-court bank rescheduling + vendor standstill
When: Liquidity shock is temporary; business is fundamentally viable; lenders are cooperative.
How: Steering committee + rescheduling (Bangladesh Bank framework) + vendor settlement ladder + performance milestones. (BB)
Watch-outs: Parallel Artha Rin threats; governance over related-party leakages.
B) Scheme of arrangement (s.228–229) with demerger
When: You need to re-tier the capital stack and/or split businesses (profitable vs legacy).
How: Court-convened classes, valuation, disclosure pack, and sanction; demerger to ring-fence value. (International Bar Association)
Watch-outs: Class composition attacks; regulatory consents (BSEC/BB) on timeline. (BB)
C) Bangladesh scheme + UK Part 26A plan
When: English-law senior debt with hold-outs.
How: UK plan to cram down cross-class; Dhaka scheme to align local creditors and deliver regulatory clearances. (Legislation.gov.uk)
Watch-outs: Valuation fairness; cross-border disclosure consistency.
D) UAE preventive settlement / restructuring + Dhaka workout
When: Major GCC creditors/trade flows; sponsor or ops in Dubai.
How: UAE process to deliver court protection/new money; Dhaka rescheduling or scheme to extend relief locally. (King & Spalding)
Watch-outs: Free-zone vs on-shore regimes; aligning milestones across forums.
E) Orderly winding-up with asset sales
When: Rescue isn’t viable; maximize net returns and stakeholder dignity.
How: Liquidator appointment; data-room for asset auctions; employee and tax settlements staged.
Watch-outs: Record preservation; priority disputes; auction value leakage.
Documentation you’ll need (and what “good” looks like)
Company pack: latest auditeds; management accounts; 13-week cash; AR/AP aging; inventory; capex; tax status; litigations; security & guarantee matrix; material contracts.
Creditor pack: debt schedule (by facility, currency, margin, maturity, security); intercreditor map; legal opinions on security.
Scheme/plan pack: valuation report, business plan with turnaround levers, class analysis, comparator (liquidation) outcomes, fairness memo; draft explanatory statement and notices.
Regulatory pack: Bangladesh Bank filings (if FX/external debt), BSEC/NBR touchpoints; board resolutions and delegated authority.
Timelines (indicative)
Out-of-court rescheduling: 6–12 weeks to heads; 8–16 weeks to full docs and CPs.
Dhaka scheme (convening → sanction): 3–6 months depending on classes, objections, and regulatory consents. (International Bar Association)
UK plan (convening → sanction): ~8–12 weeks for well-prepared cases (can be faster in urgent matters). (GOV.UK)
UAE restructuring: still bedding in under the 2024 law; plan 3–6 months depending on court and creditor complexity. (King & Spalding)
Special sectors — nuances that change the game
Banks & NBFIs
Mergers/amalgamations require Bangladesh Bank comfort before High Court sanction; prudential overlays control pace and structure. (BB)
Telco, energy, infra
Public-sector counterparties and regulator consents (BTRC, power off-takers) can dominate feasibility. Build contract cure strategies into plans.
Listed companies
BSEC disclosure/approval path; keep market abuse and insider protocols tight.
Exporters & importers
LCs, customs, and dollar availability can trump everything. Cashflow triage must prioritize trade continuity.
FAQs we hear in Bangladesh restructurings
Q1. Can we stop a bank from filing Artha Rin during talks?
You can negotiate forbearance tied to milestones; there’s no automatic bar unless you’re under a court moratorium/order. (Bangladesh Laws)
Q2. Is a Bangladesh scheme enough if most debt is English-law?
Often no. You may need a UK scheme/plan to bind those lenders, then mirror outcomes locally. (Legislation.gov.uk)
Q3. How do UAE tools help a Bangladesh group?
A UAE process can protect GCC assets/creditors, deliver new money, and create court-anchored leverage while Dhaka steps proceed. (King & Spalding)
Q4. What if there’s a genuine dispute about a creditor’s claim?
A bona fide dispute can defeat a winding-up petition; document disputes thoroughly and propose escrow/ADR to keep rescue on track. (Tahmid Ur Rahman)
Q5. Can we restructure tax or government dues?
Treatment is statute-driven; model scenarios transparently and engage early to avoid later sanction risks.
A Dhaka–Dubai–London case blueprint (illustrative)
Fact pattern:
- Bangladesh opco with BDT and USD facilities (syndicated term + LC lines), English-law intercreditor, UAE receivables.
- Liquidity crunch; Artha Rin threats; offshore parent holdco covenant breach.
TRW plan:
- Standstill with banks (milestones for IBR, 13-week cash, data-room).
- UK Part 26A plan to cram down English-law senior, convert mezz into PIK notes with warrants. (Legislation.gov.uk)
- Dhaka scheme to reschedule local banks, collateral refresh, vendor trust fund. (International Bar Association)
- UAE preventive settlement to protect receivables and authorize DIP-style working capital. (King & Spalding)
- FX approvals and post-closing governance (independent director, reporting covenants). (BB)
Outcome:
- Stabilized supply chain; time-boxed court protections; harmonized documents; integrated communications to employees, suppliers, and regulators.
How TRW executes (and why it matters)
Integrated teams: Dhaka litigators (winding-up/Artha Rin), corporate (schemes/mergers), banking (security, intercreditor), regulatory (Bangladesh Bank/BSEC), plus Dubai & London restructuring counsel.
Process discipline: weekly war-room cadence; day-by-day CP tracker; valuation workstream governance; model audit; two-step disclosure process to pre-empt class challenges.
Negotiation leverage: credible litigation readiness (Artha Rin and winding-up defenses), plan comparators, and cross-border filings to neutralize hold-outs.
If you want a deeper dive on reorganizations, see our overview on Corporate Restructuring — TRW (internal link).
Bangladesh × Dubai × London — toolkits at a glance
- Bangladesh
■ Companies Act, 1994 — Schemes (s.228–229); winding-up. (ICSI, International Bar Association)
■ Artha Rin Adalat Act, 2003 — bank/NBFI recovery fast track. (Bangladesh Laws)
■ Bangladesh Bank — rescheduling/FX approvals. (BB) - UAE (Dubai)
■ Federal Decree-Law 51/2023 — new restructuring & bankruptcy (effective 1 May 2024), enhanced tools; Bankruptcy Court operational momentum (2025). (King & Spalding, Charles Russell Speechlys)
■ ADGM/DIFC — separate insolvency regimes. - UK (London)
■ Part A1 moratorium (Insolvency Act 1986). (Legislation.gov.uk)
■ Part 26 scheme & Part 26A restructuring plan (Companies Act 2006) with cross-class cram-down. (Legislation.gov.uk)
Step-by-step: your first 30 days with TRW
Days 1–7:
■ Board workshop (solvency, duties, options).
■ Information ask & data-room build.
■ Stakeholder map (banks, trade, landlords, tax, employees).
■ Moratorium options assessed (UK; UAE) and Artha Rin risk modelled. (Legislation.gov.uk, King & Spalding)
Days 8–14:
■ 13-week cash + stabilization measures (vendor triage).
■ Restructuring term sheet v1; class architecture; valuation TOR.
■ Approach Bangladesh Bank (if FX/external debt). (BB)
Days 15–21:
■ Lock-up canvass; standstill with milestones.
■ Draft scheme/plan papers (Dhaka + UK as needed). (International Bar Association, Legislation.gov.uk)
Days 22–30:
■ File convening applications; UAE protective steps where relevant. (King & Spalding)
■ Communications: employees, key suppliers, and media holding lines.
Common pitfalls we fix early
■ Unregistered security or expired stamps that gut priority.
■ Loose intercreditor language that invites hold-outs.
■ FX assumptions without regulator dialogue. (BB)
■ Valuation that ignores Bangladesh auction outcomes or UAE/UK court standards.
■ Disclosure gaps that jeopardize sanction.
■ Segment-blind plans that ignore public-sector counterparty risks.
Short checklist (pin this)
■ Board minutes + solvency analysis every 2 weeks.
■ 13-week cash; vendor criticality map.
■ Security audit + perfection fixes.
■ Bangladesh Bank/FX roadmap; CPs tied to approvals. (BB)
■ Class analysis and creditor engagement plan.
■ Litigation plan for Artha Rin filings. (Bangladesh Laws)
■ Valuation & fairness narrative that stands up in Dhaka/London/UAE.
Closing thought
Restructuring is not just law; it’s orchestration. In Bangladesh the decisive advantages are: (1) credible litigation posture (Artha Rin and winding-up defenses), (2) regulatory choreography (Bangladesh Bank/BSEC), and (3) cross-border muscle (Dubai/UK) when lenders or suppliers sit offshore or documents are English-law. TRW is built exactly for this intersection.
TRW contact (Bangladesh • Dubai • London)
Tahmidur Remura Wahid (TRW) Law Firm
Contact Numbers: +8801708000660 • +8801847220062 • +8801708080817
Emails: [email protected] • [email protected] • [email protected]
Global Offices:
- Dhaka: House 410, Road 29, Mohakhali DOHS
- Dubai: Rolex Building, L-12 Sheikh Zayed Road.
Structured summary table
| Topic | Bangladesh | Dubai / UAE | London / UK | TRW Notes |
|---|---|---|---|---|
| Core legal basis | Companies Act, 1994 (winding-up; s.228–229 schemes); Bankruptcy Act, 1997; Artha Rin Adalat Act, 2003 | Federal Decree-Law 51/2023 (effective 1 May 2024); Bankruptcy Court being operationalized (2025); ADGM/DIFC separate | Insolvency Act 1986 (Part A1 moratorium); Companies Act 2006 Part 26 & 26A | Combine Dhaka schemes with UAE/UK processes for cross-border effect. (ICSI, International Bar Association, Bangladesh Laws, King & Spalding, Charles Russell Speechlys, Legislation.gov.uk) |
| Pre-insolvency tools | Bank rescheduling, one-time exit (policy-driven), consensual workouts | Preventive settlement, restructuring under 51/2023 | Part A1 moratorium; lock-ups; plan/scheme | Build standstills with milestones; map FX/BB approvals. (BB) |
| Court-led restructuring | High Court scheme (classes, disclosure, sanction) | Court-supervised restructuring; fresh funding mechanisms | Part 26A plan with cram-down; Part 26 scheme | Align valuation and fairness standards across courts. (International Bar Association, Legislation.gov.uk) |
| Enforcement pressure | Artha Rin filings by banks/NBFIs, collateral auctions | Rapid court uptake under the new regime | UK enforcement stays during moratorium/plan windows | Use leverage from each forum to close handshakes. (Bangladesh Laws, Legislation.gov.uk) |
| Cross-border recognition | No UNCITRAL Model Law adoption | Recognition via domestic procedure; free-zones vary | English courts have deep case law on schemes/plans | Engineer recognition through contracts, security situs, and parallel filings. (Academia) |
| Regulatory overlays | Bangladesh Bank on FX/debt; BSEC for listed | Executive Regulations & court practice maturing | Judiciary guidance on schemes/plans practice | Bake regulator timelines into CPs and long-stops. (BB, King & Spalding, Courts and Tribunals Judiciary) |
| Typical timeline | 3–6 months for schemes; quicker for reschedulings | 3–6 months as courts scale up | 8–12 weeks for streamlined plans | Parallel tracks compress total duration. (International Bar Association, King & Spalding, GOV.UK) |
Disclaimer
This guide is high-level and for general information only; it is not legal advice. Outcomes turn on facts, evolving policies, and court practice. Please consult TRW for tailored advice on your situation.
If you’d like, we can map your capital stack and sketch a Dhaka–Dubai–London path today.