Winding Up Cases in Company Law – Bangladesh
Winding up is the legal process of dissolving a company whereby its assets are liquidated, liabilities are paid off, and any surplus is distributed among shareholders. In Bangladesh, winding up of companies is governed by the Companies Act, 1994.
Legal Framework
- Companies Act, 1994 – Sections 241 to 341
- Companies (Court) Rules, 2009
- Insolvency Act, 1920 (where applicable)
- Bankruptcy Act, 1997 (for individual partners in case of partnerships)
The High Court Division of the Supreme Court of Bangladesh has exclusive jurisdiction over winding up matters.
Types of Winding Up
1. Voluntary Winding Up
Initiated by the company itself when it decides to cease business operations.
Grounds:
- Expiry of the period fixed by the Articles of Association
- Passing a special resolution by shareholders to wind up
- Declaration of solvency by directors (in case of members’ voluntary winding up)
2. Compulsory Winding Up by Court
Initiated through a petition filed before the High Court under Section 242 of the Companies Act.
Grounds:
- Inability to pay debts
- Special resolution by the company for winding up
- Just and equitable grounds
- Default in filing statutory reports or holding meetings
- Reduction of membership below minimum
3. Winding Up Under Supervision of Court
Where a voluntary winding up is already in progress, but the court intervenes to supervise the process.
Who Can File a Winding Up Petition?
Under Section 245 of the Companies Act, the following persons can present a winding up petition:
- The company itself
- Creditors (secured or unsecured)
- Shareholders
- Registrar of Joint Stock Companies and Firms (RJSC)
- Government (in public interest cases)
Winding Up by Court – Procedure
Step 1: Filing the Petition
- Petition must be filed before the Company Bench of the High Court Division.
- Must be supported by an affidavit, statement of affairs, and other relevant documents.
- A public notice of the petition is required to be published in newspapers.
Step 2: Appointment of Provisional Liquidator (Optional)
- The Court may appoint a provisional liquidator to safeguard company assets until the final hearing.
Step 3: Final Hearing
- Court hears objections from stakeholders, creditors, and the company itself.
- If satisfied, passes a Winding Up Order and appoints an Official Liquidator.
Step 4: Liquidation Process
- The liquidator takes charge of:
- Realizing company assets
- Settling debts
- Paying dues to employees, tax authorities, and secured creditors
- Distributing surplus to shareholders
Step 5: Dissolution of the Company
- After settlement of liabilities, the Court may pass an order for dissolution of the company.
- Registrar records the dissolution in the official register.
Inability to Pay Debts – Key Ground
As per Section 241(1)(e), a company is deemed unable to pay its debts if:
- It fails to pay a debt of BDT 1,000 or more within 21 days of receiving a demand notice.
- Execution of a court decree remains unsatisfied.
- It is proved to the Court that the company is commercially insolvent.
Role of the Official Liquidator
The Official Liquidator, usually an officer appointed by the Court, is responsible for:
- Preparing the statement of affairs
- Realizing assets
- Settling liabilities
- Conducting meetings with creditors and contributories
- Preparing final accounts and reports
Consequences of Winding Up Order
- Board of Directors’ powers cease
- All legal proceedings against the company are stayed
- Company’s assets are frozen and managed by the liquidator
- Employment contracts may be terminated
- Debts and liabilities are settled according to statutory priority
Priority of Payments During Liquidation
| Order | Recipient |
|---|---|
| 1 | Winding up costs and liquidator fees |
| 2 | Secured creditors |
| 3 | Preferential debts (wages, taxes) |
| 4 | Unsecured creditors |
| 5 | Shareholders (if surplus remains) |
Duration and Practical Issues
- Winding up proceedings can take 1 to 3 years or more depending on complexity.
- Practical delays arise due to court backlog, asset disputes, tax claims, and absence of modern insolvency practices.
- In many cases, companies become dormant rather than formally wound up due to cost or procedural burdens.
Summary Table
| Topic | Details |
|---|---|
| Governing Law | Companies Act, 1994 |
| Court Jurisdiction | High Court Division |
| Types of Winding Up | Voluntary, Compulsory, Supervised |
| Petitioners | Company, Creditors, Shareholders, RJSC |
| Key Ground | Inability to pay debts |
| Liquidator | Official Liquidator appointed by court |
| End Result | Dissolution of the company |
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