Anika Mardiah Chowdhury
Winding up a company means ceasing its existence, and this winding up or liquidation is possible if the Company is registered as per the law of Bangladesh. In some cases, the liquidation process and winding up differ slightly; liquidation is specifically about selling off company assets to pay creditors and then closing the Company, and winding up includes all the processes and affairs, including liquidation. Though the winding up or liquidation seems uncomplicated, the winding up matter is a serious affair, which is evident from the perusal of the entire Part V of the Company Act as held in the case of Ellal Textile Mills Ltd. Vs. Abdul Awal, 38 D.L.R. A.D.D.) 26.
This winding-up process or liquidation is not applicable for a sole proprietorship or partnership business, as in the case of Bengal Waterways Ltd. Vs. Rahimuddin Ahmed (1982), 34 D.L.R. A.D.D.) 47 states that a private limited company and partnership firm will be dissolved by following the same principles.
The liquidation process starts with filing a petition under the Company Act. After that, Courtcourt fixes a liquidator. Also, the order of winding up has to be filed in the Registrar of the Joint Stock Companies and Firms. There are several grounds for winding up a company, as in the case of Rohimuddin Ahmed vs. Bengal Water Ways Ltd. (1979) 31 D.L.R. 28 states some grounds which justify the dissolution of the Company under Section 162 of the Companies Act, 1913 (corresponding to Sec 241 of the Companies Act, 1994). In the following case, three grounds were established for winding up a company: firstly, if the default is made in filing a statutory report; secondly, in holding statutory meetings. Thirdly, if the Company is unable to pay its debt or if the Court is of the opinion that it is just and equitable, the Company should be wound up.
Under the Company Act 1994, there are three ways in which a company can be winded up in Bangladesh. The winding-up of a company may be either:
- byCourtcourt or
- voluntarily or
- Subject to the supervision ofCourtcourt.
Winding up by the Court
According to the Company Act, 1994, the Company may be wound up if the Company does not commence its business within a year of its incorporation or suspends its business for a whole year and if the number of members is reduced in the case of private Company below two members and for the public Company below seven members.
Also, if the Company is unable to pay its debt and others, for example, in the case of Prime Finance and Investment Ltd vs. Delwar H Khan 15 BLB.L.C..A.D.D.170, The High Court Division was very much conscious of the broad fact of huge loan liabilities of the Company. It was of the view that the same has to be put at a halt. Accordingly, the Court allowed the application for the winding up of the Company to appoint an official receiver as the liquidator and pass other incidental orders.
Also, on just and equitable grounds, the Court can order winding up a company, for example, in the case of Yunus Bhuiyan & Others Vs. Bashati Property Development Ltd. 4 BLC 249 held that Since there is a misunderstanding among the directors and total deadlock in the business of the Company and since there is no chance of any compromise between the two groups of Directors hence, the Company is liable to be wound up on just and equitable ground and for ends of justice and also for the benefit for all concern. On the other hand, it will not be just and equitable if there are other ways or alternative remedies for the petitioner to redress, as in the case of Rahimuddin Vs. Bengal Watennays Ltd. (1974) 26 DLR 285, an application for winding up of a private limited compshareholderso shareholders rejected as there is no ground that it is equitable to do so. Rather, special circumstances of the case demanded an assurance from the respondent that he would act in a way that did not in any manner affect the interest of the other sharer.
Voluntarily winding up
company closure in bangladesh voluntary winding up occurs when a resolution passes in a general meeting or the Company expires by the article. Then, a declaration of solvency has to be prepared and signed by the directors. The declaration must be verified by an affidavit to the effect that the directors have made a full inquiry into the affairs of the Company. The declaration will be signed by all the directors of the Company or, in the case of a company that has more than two directors, the majority of the directors.
Subject to the Supervision of the Court
This winding-up process is sometimes called the creditor’s voluntary winshareholdershe. The shareholders resolve, but the creditors do the formalities. This winding-up process is done voluntarily, and the court orders that the process will occur under its supervision with such liberty.
It is to be mentioned that when an order of winding up is made at the discretion of Courte court, then no suit or legal proceeding shall proceed without leaving Courte court as under section 250 of the Company Act, but if requirements of section 241 of the Company Act satisfies, then shall not be disallowed to do so just because other equally efficacious remedies available to the petitioner as held in the case of Amir Hossain Vs. Homeland Footwear Ltd and others, 55 DLR 478.
Furthermore, the petitioner has to prove that he has an interest in the winding-up process, as in Mazharul Haque Vs. Bulk Management (Bangladesh) Ltd. and others 48 DLR 453 where the petitioner has not shown how he would derive any advantage or minimize some disadvantage from winding up of the respondent company; thus, it held that he has no locus standi for its winding up.
Though the person has shareholders, shareholders and stakeholders get the advantage of winding up the Company as they get their interest back. Also, it is easy to process. The Court oversees the process. Still, the disadvantages are that the Company loses its identity along with its goodwill, intellectual properties, licenses, bonds, and all others.
Lastly, it has to be taken into account that as the process of mortgage and winding up is a different issue, not paying the mortgage debt shall not be the reason for winding up a company. Also, in the case of Bangladesh Shilpa Bank Vs. M/s. S.S. Mujibullah (1977) 29 DLD.L.R.7 no occasion arises for invoking the provision of section 162 of the Companies Act when all the assists and property of the mortgagor companies are assigned and mortgaged to the Bank, and specific remedy and procedure are provided inP.O.. 129 of 1972. The following case also held that temporary inability to repay the debt should not be an occasion for winding up of a company that is opposed to the State’s policy in company closure in bangladesh.
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