Company Winding Up
Winding up a company, also known as liquidation, is the legal process of bringing a company’s operations to an end, settling its debts, and distributing any remaining assets. This process ultimately leads to the dissolution of the company, where it ceases to exist as a legal entity.
Company dissolution / winding up procedure in Bangladesh
From shareholders deciding they wish to retire to the assets and goodwill of a company being sold to a new owner (as opposed to a share sale), there are many reasons why business owners choose to dissolve a company. Voluntary dissolution, sometimes called striking a company off or winding a company up, is a slow process that can be taken by any business as long as it has not, in the previous three months
- carried out its normal business activities
- changed its name
- carried out any activity not related to the winding up of the business. Activities which do not obstruct an application to dissolve a company include selling property or rights that a company needed when it traded and settling its debts
- been threatened by creditors with liquidation
- entered into a credit agreement like a company voluntary arrangement
- been the subject of any legal proceedings
Winding up of the Company is referred to as the legal mechanism of permanently shutting down a company. It is a procedure by which the Company ends its existence as a separate legal entity after filing for dissolution under the supervision of a liquidator. During this critical period of the Company’s existence, the Liquidator oversees and manages its assets to ensure that the interests of the stakeholders are not compromised. Dissolution eventually takes place, wherein the Registrar of Companies dissolves the Company and strikes the name from the register. As a result, the Company’s existence ends.
According to Section 245 of the Companies Act of 1994 (“Companies Act”), a petition for winding up may be submitted by a creditor, the company, or contributory, either together or separately. Each current and former member of the company shall be obligated to contribute to an amount adequate to cover the company’s debts, liabilities, charges, and liquidation expenditures in the case of the company’s winding up, according to Section 235 of the Companies Act.
The term “contributory” is defined in Section 237 to signify that everyone is obligated to contribute to a company’s assets in the case of a winding-up. However, if the former member has not been a member for more than a year prior to the start of the winding up or for any obligations of the contractual business since he has not been a member, or if the current members are unable to make the required contribution, the former member shall be exempt from the duty of making such contribution. However, in the event of a limited company, no member (present or past) shall be obliged to contribute the sum in excess of any unpaid on the shares for which he is accountable. In the event of a limited company’s dissolution, directors’ liability (present or past) is unlimited
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