Winding up a company in Bangladesh – Full process and relevant cases in 2024
In Bangladesh, the winding up of a firm can be either:
Options include voluntary, court-ordered, or subject to court monitoring.
Except for creditor voluntarily winding up, solvent companies are usually the ones to wind up.
The method of winding up voluntarily by passing a special resolution is outlined below.
Procedure for Voluntary Winding Up:
FIRST STEP: PREPARE DOCUMENTS
DECLARATION OF SOLVENCY
A declaration of solvency must be produced and signed by the directors. The declaration will include a disclosure of the company’s assets and liabilities as of the latest predictable date before the declaration. The declaration will also say that the company has no debts or that it will be able to pay its debts in full within two years of the start of the winding-up process.
The declaration must be accompanied by an affidavit indicating that the directors conducted a thorough investigation into the company’s activities. The declaration will be signed by all of the company’s directors, or the majority of the directors if there are more than two.
Accounts & Audit
The Profit and Loss Account and audited Balance Sheet shall be prepared and audited up to the most recent predicted date as specified above. The auditor’s report should be requested.
Second Step: Board Meeting and Extraordinary General Meeting.
Board Meeting
A board meeting will be held in accordance with the regulations of the Companies Act and the company’s Articles. The majority of directors should be present at the meeting. During the meeting, the directors will approve:
a. Accounts were audited.
b. The declaration of the directors.
The directors will also convene an extraordinary general meeting to enact a special resolution to wind up the firm. Following the meeting, the declaration and affidavit (completed in the first step) should be notarized.
Second STEP : FILLING THE DECLARATION WITH THE RJSC
The declaration must be filed with the Registrar of Joint Stock Companies and Firms within 5 weeks after the date of the declaration.
EXTRAORDINARY GENERAL MEETING.
An extraordinary general meeting will be conducted, and the special resolution will be approved. The special resolution will authorize the following: i) winding up; ii) appointment of the liquidator; and iii) liquidator’s remuneration.
FILLING WITH RJSC
The proceedings of the extraordinary general meeting (together with Form VIII) and the appointment of the liquidator will be filed with the RJSC.
THIRD STEP: APPOINTMENT OF THE LIQUIDATOR
LIQUIDATOR
After the special resolution is passed, the liquidator will accept the appointment, take office, and ensure that RJSC is notified of his or her appointment.
Within thirty days of being appointed as liquidator, the liquidation will notify the Deputy Commissioner of Taxes with jurisdiction to assess the company.
GAZETTE PUBLICATION:
Notice of any special or extraordinary resolution for voluntary winding up of a company shall be given by the company within ten days of its passing by advertisement in the official Gazette, as well as in a newspaper circulating in the district where the company’s registered office is located. The appointment of the liquidator should also be announced in the advertisement.
AGM (IF REQUIRED).
In the event that the winding up continues for more than one year, the liquidator shall arrange an Annual General Meeting of the company at the end of the first year from the commencement of the winding up and of each succeeding year, or as soon thereafter as may be convenient within ninety days of the close of the year, and shall lay before the meeting an account of his acts and dealings and of the conduct of the winding up during the proceeding year, as well as a statement
FOURTH STEP: FINAL MEETING AND FILING WITH THE RJSC
FINAL ACCOUNT
The liquidator will prepare a final account of the winding up, outlining how the winding up was carried out and the company’s assets were disposed of. Then s/he will convene an extraordinary general meeting.
EXTRAORDINARY GENERAL MEETING.
The meeting will be announced through an advertisement in the official gazette and a newspaper circulating in the district where the company’s registered office is located, detailing the time, venue, and purpose of the meeting at least one month in advance.
A special resolution on the disposal of the company’s books and documents will be voted at the extraordinary general meeting.
FILLING
Within one week after the winding up meeting, the Registrar of Joint Stock Companies and Firms will receive a return.
After the final meeting and the submission of the documents to the Registrar, the company’s legal entity will be dissolved.
Company Law Winding up cases?
Winding up is the process of dissolving a business. When a commercial organization closes, it ceases to function normally. The typical goals are to liquidate stock, settle debts, and distribute any leftover assets to partners or shareholders. The phrase is most commonly used in the United Kingdom, where converting assets into cash is known as liquidation.
In other words, this method generates a cash pool that a corporation can utilize to pay off debts and other outstanding bills before distributing the leftover funds to shareholders, corporate members, investors, and other investors. A receiver, often known as a “liquidator,” may be appointed to manage the asset distribution process. Company Winding-Up Act in Bangladesh
Amin Md. Vs. Bengal Shipping Line Ltd., 50 DLR (2008), p. 444.
The need to protect a company’s goodwill as well as the interests of Al and other shareholders has resulted in the emergence of extensive law supporting the idea that even admission of winding-up motions should be granted judiciously and not as a matter of course.
Winding up Company Law Cases
Dira Dockyard and Engineers Ltd versus Bangladesh Shilpa Rin Shongstha and others, 10 BLC (AB) 131
The contention that the decree obtained by respondent no. 1 was not executable and that the process of debt realization had become barred by law, and thus the order of winding up and liquidation of the Company was not legally maintainable, is of no substance because no such contention was brought before the High Court Division, nor were any particulars presented to the Appellate Division to substantiate the contention above.
In such a circumstance, the petitioners’ purpose for bringing the petition is completely immaterial and should not be considered.
Moksudur Rahman v. Bashati Property Development Ltd., 5 BLC 245.
Half of the board is made up of the petitioner; rather, two of the four directors are the petitioners, who own half of the shares and thus do not have the right to invoke the court’s jurisdiction under Section 233 of the Companies Act of 1994.
Rohimuddin Ahmed vs. Bengal Water Ways Ltd. (1979), 31 DLR 28
Some grounds which justify the dissolution of the company: Section 162 of the Companies Act, 1913 (corresponding to sec 241 of the Companies Act, 1994) provides for the winding up of a company on six grounds, three of which are quoted below as they are found present in this case: (iv) if the default is made in filing a statutory report or in holding statutory meetings, (v) if the company is unable to pay its debt, (vi) if the Court is of opinion that it is just and equitable
Prime Finance & Investment Ltd vs. Delwar H Khan (15)
The High Court Division was well aware of the Company’s massive loan liabilities and believed that they needed to be halted, as well as the provision of section 241 (v) (vi) of the Companies Act, which deemed it just and equitable to order the Company’s winding up. As a result, the application to wind up the Company was approved, the official receiver was appointed as the liquidator, and other incidental orders were issued.
Where the allegations in the petition, which are supported by evidence, reveal the company’s complete inability to pay off creditors, an ever-increasing burden of interest, and control of the business as a result of sharp differences among the shareholders, the court is fully justified in issuing a winding-up order.
Ellal Textile Mills Limited. Vs. Abdul Awal, 38 DLR (AD) 26.
The winding up process is serious. The winding-up problem is a serious subject, as evidenced by a thorough reading of Part V of the Act, and the Privy Council’s concern in the event of an unwarranted winding-up order may be seen.
The Court has the option to wind up a firm, which it may refuse to do based on the preferences of the majority or because it is solely beneficial to the petitioning creditor and not to all creditors in general.
Bangladesh Tyres Limited. Vs. Agrani Bank and Others, 42 DLR 474.
A limited corporation is a legal entity that lives, operates, and functions under the provisions of a statute; a death warrant can be issued under the same statute. The death warrant in the form of winding up should be used sparingly. Last-ditch measures should be taken to save a company from liquidation.
Yunus Bhuiyan and Others vs. Bashati Property Development Ltd., 4 BLC 249.
Winding up of the company on just and equitable grounds- Because there is total misunderstanding among the directors and total deadlock in the Company’s business, and there is no change in any compromise between the two groups of Directors, the Company is liable to be wound up on just and equitable grounds, for the ends of justice, and for the benefit of all concerned.
Bangladesh Waterways Ltd. Vs. Rahimuddin Ahmed (1982), 34 DLR (AD) 47.
A private limited corporation can be dissolved using the same criteria as a partnership.
A. Gaffer Limited vs. Enjari Garments (Pvt) Ltd., 8 BLT (HCD) 295
The respondent admitted to a sum of TK. 9,55,941.00 was owed to the petitioner up until November 1997, of which the respondent paid a total of TK 1,00,000.00, resulting in an admitted responsibility of respondent No. 1 to the petitioner of TK 8,55,941.00- Held: the respondent corporation is unable to pay its admitted debt of TK. 8,55,941.00, and hence it is likely to be wound up.
Rahimuddin vs. Bengal Watennays Ltd. (1974), 26 DLR 285.
An application to wind up a private limited company (controlled by two shareholders) was denied because there was no basis to believe that doing so was just and equitable. However, the specific circumstances of the case necessitated an assurance from the respondent that he would behave in such a way that the other sharer’s interests would be unaffected.
Where the petitioner has alternative remedies for redressing his grievance under the Act’s provisions, ordering winding up is not just and equitable.
Bangladesh Shilpa Bank vs M/s. S.S. Mujibullah (1977), 29 DLR 67.
When all of the mortgagor firms’ assets and property are assigned and mortgaged to the Bank, and precise remedies and processes are provided in the P.O., there is no reason to invoke section 162 of the firms Act. 129 of 1972. A temporary incapacity to repay debt should not be used to wind up a corporation, as this is contrary to state policy.
Moushumi Industries Ltd & Others vs. Asad Ahad & Others, 24 BLD (AD) 72
The loan was not the directors’ personal loan, but that of the corporation. The corporation should have paid the petitioners the unpaid balance. The petitioners are creditors and so entitled to a winding-up order.
Amin Scales Limited. Vs. Md. Yakub, 39 DLR(AD) 201
Admitting an application followed by standard announcements in gazettes and newspapers is likely to cause concern among the company’s creditors, drive away consumers, and cripple its activity.
The Court’s discretion to decline to issue an order for the winding up of the firm where applicable. The corporation was unquestionably losing money year after year, and its mills had been closed since 1983. The Court was correct in deciding that it was just and equitable to wind up the corporation.
Bangladesh Tyres Limited. Vs. Agrani Bank and Others, 42 DLR 474.
The appellant company’s counterclaim for money questioned the maintainability of the application for winding up on the basis of incapacity to pay bills. The Court determined that the counter-claim was only an accusation, as no proof was presented in support of it. Such a counter-claim was unacceptable.
Bashati Property Development Ltd vs. Younus Bhuiyan and Others, 4 BLC (AD) 236.
Respondent No. 1 has made a strong case for winding up, which has been accepted by the learned Company Judge. The petitioners now seek to rely on their supplementary affidavit and application under Section 233 of the Companies Act, which they did not present to the learned Company Judge during the ultimate hearing, nor are they aggrieved by the learned Company Judge’s failure to consider these documents.
Motiur Rahman vs May Industries Ltd., 37 DLR 41
Winding up a company’s order must be based on existing facts rather than what they were great at.
Sayeda Haque vs. Shams Ltd and Others, 6 MLC 748
Since the Shams Limited company should never carry on its business and cannot carry on business in the future, it would be just and equitable to pass an order for the company’s winding up, and the official liquidator would take over the company’s assets and proceed with the liquidation proceedings by law.
Nizamul Haqque and others vs. Singa-Bangla Garment Manufacturing Co. (Pvt. Ltd.), BLD 1991 (HCD 49)
Neglect to pay rent-A petition for winding up might be filed if rent is not paid on time. Because the company is unable to pay its confessed liability and the application procedures have been followed, the company is likely to be wound up.
Mazharul Haque vs. Bulk Management (Bangladesh) Ltd. and others (48 DLR 453)
The petitioner has not demonstrated how he will benefit or minimize some disadvantage from the winding up of the respondent corporation, and hence has no locus standi for its winding up.
Abdul Hamid scores one. Dhakeswari Cotton Mills Ltd. and another, BCR 1983 HCD 320
Held that no provision of the Companies Act relating to company winding up shall apply to any scheduled industrial concern under P.O. No. 27 of 1972.
Consumer Testing Laboratories Ltd vs. Registrar of Joint Stock Companies and Firms, 16 BLC 224
Referring to Section 253 of the Act, the learned Advocate for the Petitioner contends that the Court has the authority to halt the winding-up process entirely if it so chooses. The winding-up process in respect of Consumer Testing Laboratories Limited is directed to deliver over the Company’s assets and properties, both moveable and immovable, to the shareholders within four weeks of receipt of the certified copy of this order.
Cathay Pacific Airways Limited vs Vantage International Limited, 30 BLD (HCD) 589
The application to wind up the corporation is allowed. In this case, the corporation makes no claim that it did not collect the funds from the sale of passenger tickets and cargo freight on behalf of the petitioner. Furthermore, the company has not disowned the Statements issued by it in October, November, and December 2006, but rather disputes the authority of the concerned official to sign the Statements in question, claiming that the concerned officer issued such Statements at the petitioner’s request to take unfair advantage of the situation.
Ella Textile Mills Ltd v. Md Abdul Awal, 38 DLR (AD) 26.
Prayer for correction of share-register—When a winding-up order is issued, the rectification prayer must be denied.
Amir Hossain vs. Homeland Footwear Ltd & Others, 55 DLR 478
A court can make a winding-up order for a corporation at its discretion, but under section 250 of the Act, no suit or other legal procedures against the company may be pursued or initiated unless the court grants leave. If the process under Section 241 of the Companies Act meets the criteria of the law, it will undoubtedly find its mark and will not be denied or deflected because the petitioner has alternative equally effective remedies accessible to him in another place.
BRTC vs. Ashraf Jute Mills Ltd, 45 DLR 282.
When a process before the High Court Division is pending under Section 162 of the Companies Act, the fate of the Company, including its assets and obligations, as well as the interests of all creditors, secured or otherwise, and the shareholders, is under consideration by the court.
Eastern Bank Limited vs. Bangle Carpets Ltd. (48 DLR 392)
Based on the respondent company’s conduct and the manner in which promises were made, assurances were given, and new repayment schedules were chalked out only to be broken, giving the impression that the company’s affairs are not clean and above board, the opinion is that the respondent company is unable to pay its debt and that it would be just and equitable to wind up the company. As a result, the respondent corporation is ordered to be wound up immediately.
Thai Airways International Limited versus Air Route Service Limited and others, 48 DLR 412.
The responder corporation is an outright defaulter who is unable to repay the loan. After reviewing the documents on record and the Advocate’s submission for the petitioner, it appears that it is just and proper to wind up the respondent corporation.
Vega Sweater (Pvt.) Ltd. and Associates. Vs. Agrani Bank, 8 BLT (HCD 226)
The firm is a Private Limited firm, and the quorum required for the transaction of the Directors’ business shall be two; however, because the company’s Articles of Association state that the business of the Board of Directors is two, the company has been unable to conduct business. And the company’s operations have been halted for almost a year. The company is currently unable to pay its debts, therefore it is right and equitable to wind it up.
Md. Ismail Siddique vs. Crescent Apparels (Private) Ltd., 43 DLR 99.
The Court will assess the matter as a whole based on the materials provided. There is no possibility for rectification of the share register under section 38 of the Act, as suggested on behalf of the respondent, once the petitioner has established his case for winding up the company.
Tamanna-e-Jahan vs. Paper Converting & Packaging Ltd. & Others, 10 BLT (HCD 450)
Petitioner is a magazine publisher, and respondent No. 1 is a limited liability company engaged in the business of publishing, printing, and packaging. Held: there is a bona fide dispute regarding the existence and amount of the debt, and the petitioner is unable to determine the same through the winding up process.
Bangladesh Consumers Supplies Company Ltd vs. Registrar, Joint Stock Co., 46 DLR 552
When the government conducts commercial or trading business through a company, it does not act as a department or organ of the government in its administrative capacity, and such a company meets all of the qualifications of a company under the Companies Act, and the petition for its winding up is competent.
Ambala Cold Storage (Pvt) Limited. Vs. Prime Insurance Company. Ltd, 56 DLR 422.
Sections 241 and 242- The claim is not undisputedly established, and until it is admitted, it cannot be regarded to be a debt, and the responding firm is obligated to pay it. Winding up a firm by Court for Debt is not required where there is a genuine dispute about the existence of the debt.
SMM Yusuf vs. Bismillah Shipping Lines (Pvt.) Ltd. and Others, 5 BLC 603
Admittedly, no Annual General Meeting or other meeting has been held since the Company’s incorporation about 14 years ago, and no return has been submitted to the Register of Joint Stock Companies, and the heirs of the deceased shareholder have not been included as members of the company, and it has turned into a non-man company from the start. In such circumstances, it is just and equitable that the company be wound up.
