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It is usual for a company to go into liquidation when it is experiencing insolvency, which denotes that the company is unable to pay its obligations and the dues that are owed to it. Here at ABC Partners, we ensure that this is the case by providing our customers with Liquidation Services, which cover both the financial and legal aspects of the liquidation process. Following the termination of business activities, any residual assets are liquidated and distributed to creditors and shareholders in accordance with the order of priority of their respective claims. In a nutshell, liquidation refers to the act of putting an end to an existing company while simultaneously distributing its assets to various claimants. Once the process of liquidation of a bankrupt company is finished, the company in question no longer exists. The term “liquidation” may also be used to refer to the process of disposing off remaining inventory, which is often done at significant price reductions. The dissolution of a company has the potential to bring about both positive and negative consequences. One potential disadvantage is having to liquidate assets in order to satisfy financial obligations, such as debts. Additionally, one of the benefits of liquidation is that it makes it possible to look for new business prospects in other fields when the process is complete.
The word Company is used in this context rather than Businesses due to the fact that sole proprietorships and partnership businesses in Bangladesh do not follow a comparable phrase or
method, such as liquidation or wind up, in Bangladesh. Therefore, in order to go forward with the process for liquidation, one is required to have or have had a functional company that was properly incorporated and registered in accordance with the laws of Bangladesh.
Liquidation, also known as winding up of a business in Bangladesh, is a method for the dissolution of a company. This is the process by which a company puts an end to its existence. The assets of a firm are turned into cash via the use of this mechanism. In other phrases, this process results in the creation of monetary funds that can be used by a company to pay its debts as well as any outstanding bills. The remaining funds can then be divided up and distributed to shareholders, members of the company, partners, or any other investors who have contributed to the company. It is possible to appoint a receiver, often known as a Liquidator, to oversee the process of assets being distributed in this manner. You may appoint ABC Partners, one of the most reputed law firms in Bangladesh, as your liquidator if you want our assistance in that capacity.
There are many different kinds of liquidation under the Companies Act 1994, the most common of which are as follows: creditors’ voluntary liquidation, which is for companies that have debts; members’ voluntary liquidation, which is for companies that have no debts; compulsory liquidation, which is when a court issues a winding-up order; official liquidation; and provisional liquidation. These liquidations are explained in brief below:
This specific liquidation is initiated by a resolution of the company’s Directors, which is followed by a resolution from the company’s Shareholders. Depending on the state of the company’s finances, the Voluntary Liquidation may be conducted in either of two ways. Every solvent company must need a Members Voluntary Liquidation (MVL). Additionally, a Creditors Voluntary Liquidation is a must for any and all bankrupt companies (CVL).
A Members Voluntary Liquidation otherwise known as MVL. This is the official procedure for closing down a financially stable company. In order for a company to qualify for a Members Voluntary Liquidation, it must always be able to pay off all of its obligations and ensure that all of its tax filings are up to date.
Creditors Voluntary Liquidation is also known as CVL. If a company is unable to pay its obligations, bills or debts as they come due, it is considered insolvent and must wind up through a process known as creditor voluntary liquidation (CVL).
Official liquidation is alternatively termed as judicial liquidation. The company’s bank usually initiates this wind up process by filing a petition with the court to force the account holder company to enter into the liquidation procedure. The process, as a whole, is time-consuming and may result in additional expenses for the banking institution. The procedure also incorporates serving a statutory demand note to the company by the bank to pay up the loan amount under the Corporation Act. In the event that the company ignores to pay up the requested loan amount or fails to pay up, the loan manager or the
bank authority initiates the liquidation process by submitting an application to the court to have the company declared bankrupt officially.
It is essential that there be a scenario in which a candidate has the opportunity to petition the court for the appointment of a temporary liquidator in order to safeguard the asset in question. When a scenario like this one arises, it is the responsibility of the temporary liquidator to not only secure and defend the assets but also evaluate how the firm stands in general. And as a last step, provide the court with the recommendations in order to get a suitable conclusion or any new settlement that he deems feasible for the company.
In accordance with section 245 of the Companies Act of 1994, a petition for the company’s winding up may be submitted by a creditor, the company itself (i.e., the shareholders), or a contributing, either jointly or singly. Section 235 of the Companies Act stipulates that in the event that a company is wound up, each of the company’s current and former members are required by law to contribute to an amount that is perfectly adequate for the company’s debts, liabilities, costs, and liquidation expenses. This obligation applies even if the member has since left the company. The word contributory is defined in Section 237, and it indicates that every individual is responsible for contributing to the assets of a corporation in the event that it is wound up.
Nevertheless, if the previous members gave up their membership or ceased to exist for more than a year prior to the liquidation proceeding initiated, in that scenario the former members would be exempted from the responsibility to contribute because he was not a part of the group of members anymore for more than a year or may be because he should not take the responsibilities for the failure of the existing members to accumulate the required contribution. In spite of this, if the company in question is limited whether by shares or guarantee, no member either present or former should be obliged to pay any amount that is more than any outstanding balance on the shares for which the member is responsible. It is important to keep in mind that, in the case of the winding up of a limited company, the directors’ liability whether they are now serving or have previously served—is infinite (section 236).
The possibility of a contributor passing away or becoming disobedient raises the question of what should take place in such a scenario. In the unfortunate event that a contributor passes away, their legal agent and any heirs that they leave behind will be required to make a contribution to the company’s assets. On the contrary side, in the event that the contributor becomes bankrupt, the assignee will act as the contributor’s representative, and the estate of the insolvent will be accountable for covering the cost of any payment made in the form of such a contribution. These regulations may be found in the Companies Act of 1994, specifically sections 239 and 240.
It is required that the directors generate and sign a statement that the company is solvent. The declaration will include a statement that details the company’s assets and liabilities as of the latest date that can be reliably predicted prior to the filing of the declaration. The statement will also say that the firm has no liabilities or that it is capable of paying its debt in full within such timeframe not surpassing three years from the initiation of the winding up process. An affidavit confirming that the directors of the company have undertaken a comprehensive investigation into the company’s performance must be submitted as verification of the claim that they have done so. In the event that there are more than two directors at the company, the declaration will be signed by the majority of those directors. Alternatively, all of the directors of the company will sign the declaration.
An audited profit and loss statement as well as a balance sheet should be generated and produced up to the most recent anticipated date that was indicated above. It is crucial to obtain the report of the auditor as well.
A meeting of the Board of Directors will be called in accordance with the provisions of the Companies Act and the Articles of the company. Attendance at the meeting is required from a majority of the board of directors. During the meeting, the board of directors is going to vote to approve accounts that have been audited and the statement made by the Board of Directors. In addition to this, the directors will convene an extraordinary general meeting in order to vote on and approve the special resolution to dissolve the company. Notarization of the statement and the affidavit, both of which were prepared in the first phase, should take place after the meeting.
Following the date on which the declaration was made, it has to be submitted to the Registrar of Joint Stock Companies and Firms within the time frame of five weeks.
It has been decided to hold the extraordinary general meeting, at which the special resolution will be voted on. The special resolution will provide its consent to the dissolution of the company; the appointment of the liquidator; and the determination of the liquidator’s compensation.
The RJSC will be provided with the minutes from the extraordinary general meeting, as well as Form VIII, and will be notified of the appointment of the liquidator.
We, ABC Partners, as your trusted liquidator, will ensure that RJSC is informed of our appointment as a liquidator soon as the special resolution is enacted, at which time the ABC’s liquidation team will accept the appointment, take office, and begin serving in that capacity. Within the first thirty days after
being appointed, ABC’s liquidation team is obligated to provide notification of the appointment as such to the Deputy Commissioner of Taxes having authority over your company’s tax assessment.
Advertising of any special resolution or extraordinary resolution for winding up a company deliberately should be provided by the company by the form of an announcement in the official Gazette, and in a daily newspaper as well, if any of those are in circulation in the district in which the registered office of the company is based. This notice must be given within ten days of the passing of the resolution. In addition to that, the appointment of the liquidator has to be noted inside the advertising.
In the circumstance that the process of winding up lasts longer than a year, the liquidation team of ABC Partners is obligated to convene an Annual General Meeting (AGM) of the company at the end of the first year from the beginning of the liquidation process and of each subsequent years, or as promptly thereafter as may be expedient within three months, at the end of the previous year. At this AGM, the team is required to present an account of its actions and dealings as well as of the manner in which the winding up process was carried out during the previous year in a prescribed form along with the recommended particulars regarding the status of the winding up process.
A final account of the liquidation process will be produced by the ABC liquidation team, which would encompass how the winding up was carried out and how the company’s assets were dealt with after the company was dissolved. After this, the liquidation team will convene an Extra Ordinary General Meeting.
Not less than a month before the meeting, a notice of the meeting will be served by advertising the specific time, location, and the purpose of the meeting once in the official gazette as well as once in a local newspaper that is in circulation in the district where the company’s registered office is located. This notice will be given not less than one month before the meeting. In the same meeting i.e., the Extra Ordinary General Meeting a resolution would be approved concerning the disposal of the company’s books and documents.
Within seven days following the conclusion of the winding up meeting, a report of the proceedings will be submitted to the Registrar of Joint Stock Companies and Firms. Following the conclusion of the last meeting and the delivery of the necessary paperwork to the Registrar, the company’s status as a separate legal entity will be terminated.
Under certain conditions, the court has the authority to dissolve a company. This can happen if the company itself decides by way of a special resolution that it must be dissolved by the court; or if the
company by default file its statutory report or hold its statutory meeting; or if the total number of members of the company falls below the minimum required by the Company Law; if the company is unable to pay its arrears; or if the court is of the perception that it would be fair and equitable to dissolve the company.
Section 242 of the Companies Act of 1994 addresses the circumstances under which it is determined that a company is not capable of paying its obligations. If a creditor to whom the company is indebted for an amount and the company ignores or fails to reimburse the amount for 3 weeks, or if proceedings or other actions are issued on a judgment or order of any court in support of the creditor of the company is reverted unsettled in entirety or in portion, or if it is demonstrated to the contentment of court that the company is incapable of repaying its arrears and the court should take into consideration the contingent and potentially future liabilities of the company, and may order to wind up the company under these circumstances.
The winding up of a company that is subject to the supervision of the court is addressed under sections 316-321 of the Companies Act 1994. The court has the authority to order a judgement that the voluntary liquidation process of a business should proceed but the winding up process should be surveilled by the court or under any such circumstances as the courts deems to be fair where the company has made a special or extraordinary resolution to wind up the company deliberately. In the event that an order is obtained for the business to be wound up subject to oversight, the court may place restrictions on the use of the powers available to the liquidator provided the company was being wound up entirely intentionally. It is important to keep in mind that if a business is being wound up by the court, pursuant to section 247 of the Act of 1994, the winding up of the company is considered to have begun at the moment when the petition for the winding up was presented to the court.
The first stage, in the event that the company is dissolving or winding up by the court, is to arrange the appropriate and necessary documents. These include the profit and loss account and the audited balance, as well as the declaration of solvency, which must contain information such as the fact that the company has no outstanding arrears, along with a few other things. The company’s directors must vote in favor of approving these papers in order for them to be legally binding.
After the Declaration of Solvency has been reviewed and accepted, it has to be submitted to the RJSC (Registrar of Joint Stock Companies and Firms) within the next five weeks.
The next action that needs to be performed is to pass a special resolution by the way of an extraordinary general meeting in order to provide final approval to the decision to wind up the business and appoint a liquidator. The approval along with the minutes of the meeting is also required to be sent to the RJSC for their records. Within the time frame of 10 days the special resolution which is approved and passed should be published in the official Gazette and in a newspaper that is widely read in the area around the company’s registered office after the vote that led to its passage.
After that, the company should offer ABC Partners to perform in the capacity of a liquidator and similarly, ABC Partners is required to accept the offer. The formal appointment of ABC Partners in the capacity of a liquidator must also be reported to the RJSC for their records. Moreover, subsequently, the acceptance of the appointment must be reported to the Deputy Commissioner of Taxes with the jurisdiction of liquidation, within the first thirty days of the appointment of ABC as a liquidator.
Liquidation team of ABC Partners is responsible for preparing a Final Account that highlights how the winding up process has been carried out and how the assets have been dispersed. Following that, the team is going to convene an extraordinary general meeting for all of the shareholders. It is required that the notice of the meeting be issued in the form of advertising no less than one month prior to the meeting is scheduled to take place. This kind of advertising has to be published in the official Gazette as well as in a newspaper that is widely read in the area around the company’s registered office. At the extraordinary general meeting, a special resolution will be voted on and approved in reference to the disposal of the company’s books and documents.
At the end of the extraordinary general meeting, the decision of the meeting should be approved by the directors of the company along with the minutes of the meeting and all other required documents should be submitted to the registrar of the RJSC. Once the registrar is content with the paperwork submitted by the company, should issue an order officially stating that the company has been dissolved or wound up adhering the existing rules and regulations of the Company Law of Bangladesh.
When it comes to making a choice on whether or not to go through with the liquidation process, the director is one of the most significant people involved in the process. Before filing for bankruptcy or going through with the liquidation, the CEO or the director would consider the situation from the point of view of the investors, focusing on what may benefit them the most and what could provide them the biggest revenue and returns.
While the ABC Liquidator team works diligently for the lessee to keep up the liquidation to the loan supervisor at the earliest possible time, they also manage to keep up with everything that was going on. One thing that a company must keep in mind at all times is that once the process for liquidating the company has begun, the objectives of the business will shift. Before the commencement of the procedure of winding up of the company has begun, the organization worked toward the aim of maximizing the profits it would receive; however, that objective has now shifted to ensuring that the majority of its commitments are achieved. The liquidation procedure is handled carefully by the expert team at ABC Partners, who work for the benefit of the clients.
In the meanwhile, as a result of this circumstance, the director of the firm or organization will be considered to be suspended. And ultimately, the government of the country will have the greatest amount of authority. The ABC team in charge of liquidating, always complies with the requirements and guidelines while keeping the liquidation procedure, on the whole, intact.
ABC Partners, a renowned Law Firm in Bangladesh, has a team of highly qualified corporate lawyers who are competent in handling each and every part of the liquidation process of its client. These lawyers have worked in a variety of industries and have gained a wealth of knowledge. The following are the services that we provide to our valued clients: