If a company is registered in accordance with the laws of Bangladesh, then it is possible for the company to be wound up or liquidated. Winding up a business indicates that the firm is no longer currently in existence. In some circumstances, the process of liquidation and winding up are slightly distinct from one another.
Liquidation, on the other hand, refers to the act of selling off firm assets in order to satisfy payment obligations to creditors, while winding up encompasses all of the procedures and affairs that are associated with liquidation. According to the decision that was made in the case of Ellal Textile Mills Ltd. Vs. Abdul Awal, 38 DLR (AD) 26, the winding up or liquidation process may seem to be a straightforward process; nonetheless, the winding up issue is a serious business. This is obvious from the review of the full Part V of the Company Act.
This procedure, also known as liquidation, is not applicable to a firm that is run by a sole proprietorship or a partnership. A private limited company and a partnership business will be dissolved by adhering to the same rules, as stated in the case of Bengal Waterways Ltd. vs. Rahimuddin Ahmed (1982), which was reported in 34 DLR (AD) 47.
A liquidator is appointed by the court following a Company Act petition. The Registrar of Joint Stock Companies and Firms must receive the winding-up order. The case of Rohimuddin Ahmed vs.
Bengal Water Ways Ltd. (1979) 31 DLR 28 outlines reasons for dissolving a business under Section 162 of the Companies Act, 1913 (now sec 241 of the Companies Act, 1994). In the following case, a company can be wound up if it fails to file a statutory report, hold statutory meetings, pay its debt, or the court deems it just and equitable.
Under the Company Act 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.
Winding up by the Court
According to the Company Act of 1994, a company may be dissolved if it does not begin conducting business within a year of its incorporation, if it suspends its business operations for an entire year, and if the number of members of the company falls below two members in the case of a private company and below seven members in the case of a public company.
Additionally, in the event that the corporation is unable to fulfill its debts and other obligations. An example of this would be the case of Prime Finance and Investment Ltd. against Delwar H. Khan, which was 15 BLC (AD) 170.The High Court Division was acutely aware of the widespread fact that the Company had enormous loan liabilities, and it was of the opinion that these liabilities should be stopped.
As a result, the court granted the application for the winding up of the Company, appointed the official receiver as the liquidator, and issued a number of other incidental orders.
Also, the court has the authority to order the winding up of a company on the basis of just and equitable grounds. For instance, in the case of Yunus Bhuiyan and Others versus Bashati Property Development Ltd. 4 BLC 249. The court ruled that because there is a misunderstanding among the directors and a complete deadlock in the business of the company, and because there is no possibility of any compromise between the two groups of directors, the company is liable to be wound up on just and equitable grounds, as well as for the purposes of justice and also for the benefit of all concerned parties.
On the other hand, it will not be just and equitable if there are other ways or alternative remedies for the petitioner to redress. This has been demonstrated in the case of Rahimuddin vs. Bengal Watennays Ltd. (1974) 26 DLR 285, where an application for winding up a private limited company that is run by two share-holders was rejected because there was no ground that it is just and equitable to do so.
Voluntarily winding up
When a resolution is passed at a general meeting or when the company’s article of incorporation expires, the company is said to be winding down voluntarily. This is followed by the preparation of a statement of solvency, which must be signed by the directors.
In order to ensure that the statement is accurate, an affidavit must be submitted stating that the directors have conducted a comprehensive investigation into the operations of the firm. If there are more than two directors in a firm, the declaration will be signed by the majority of those directors. If there are less than two directors, the declaration will be signed by all of the directors.
Subject to the Supervision of the Court
Due to the fact that the shareholders are the ones who make the decision, but the creditors are the ones who handle the procedures, this process of winding up is frequently referred to as the creditor’s voluntary winding up. This process of winding up is done freely, and the court has ordered that the procedure would take place under its supervision with such freedom.
It is important to note that when an order of winding up is made in the discretion of the court, no suit or legal proceeding shall proceed without the leave of the court as stipulated in section 250 of the Company Act.
However, if the requirements of section 241 of the Company Act are satisfied, then the petitioner shall not be disallowed to do so simply because there are other equally effective remedies available to them, as was determined in the case of Amir Hossain versus Homeland Footwear Ltd and others, 55 DLR 478.
Furthermore, the petitioner is required to demonstrate that he has an interest in the process of winding up the company. This is similar to the situation that occurred in Mazharul Haque vs. Bulk Management (Bangladesh) Ltd.
and others 48 DLR 453, where the petitioner failed to demonstrate how he would benefit from the winding up of the respondent company or how he would minimize some disadvantages. As a result, the court decided that the petitioner does not have a locus standi for the winding up of the company.
The company loses its identity along with its goodwill, intellectual properties, licenses, bonds, and all other assets, despite the fact that the persons who have an interest in the company, such as shareholders and stakeholders, receive the benefits of winding up the company because they get their interests back. Additionally, the process is simple if the court oversees it. However, the disadvantages include the fact that the company loses its identification.
Last but not least, it is essential to take into consideration the fact that the process of winding up and the process of obtaining a mortgage are two distinct problems. As a result, the failure to pay the mortgage debt should not be the cause for winding up a firm.
Additionally, in the case of Bangladesh Shilpa Bank versus M/s. S.S. Mujibullah (1977) 29 DLR 67, there is no occasion for invoking the provision of section 162 of the Companies Act. This is because the Bank has been assigned and mortgaged all of the assists and property of the mortgagor companies, and the specific remedy and procedure are provided in P.O. 129 of 1972. In the subsequent case, it was also decided that a temporary inability to repay the debt should not be a reason for the winding down of a corporation that is in opposition to the policy of the state.