Overview
Liquidation or winding up represents a company dissolution process that converts assets into cash to pay debts and distribute remaining funds among shareholders and investors. A liquidator manages this distribution process.
Types of liquidation procedures
In Bangladesh, companies can be wound up through three methods:
- Voluntarily
- By court order
- Subject to court supervision
Who can file for liquidation
According to section 245 of the Companies Act 1994, petitions may be filed by creditors, the company itself (shareholders), or contributories, individually or collectively.
Liability of contributors
Section 237 defines a contributory as "every person liable to contribute to a company's assets when wound up." Current and former members face liability, though former members are exempt if they ceased membership over one year prior. In limited companies, liability is capped at unpaid shares. Directors face unlimited liability in limited companies.
The seven-step liquidation process
- File the petition: file a winding-up petition with the court based on circumstances such as insolvency or special resolution.
- Prepare documents: prepare required documents including a Declaration of Solvency, profit and loss accounts, and audited balance sheets approved by directors.
- Submit to RJSC: submit approved documents to the Registrar of Joint Stock Companies and Firms (RJSC) within five weeks.
- Pass the resolution: pass a special resolution at an extraordinary general meeting; advertise within ten days in the official Gazette and local newspapers.
- Appoint the liquidator: the liquidator accepts appointment; notify RJSC and the Deputy Commissioner of Taxes within thirty days.
- Final account: the liquidator prepares the final account and convenes an extraordinary general meeting with one month's notice to approve asset disposal procedures.
- Complete dissolution: submit all documents to RJSC to complete the dissolution.
Professional assistance available
Law firms can support liquidation by preparing documentation, resolving legal disputes, settling obligations, selling assets, handling creditor meetings and managing tax and expense payments.