Entity Dissolution in Bangladesh

Liquidation/Winding up/Dissolution is the legal procedure that brings the existence of a company to an end. During the process, the assets of the company are liquidated and converted into cash, which is then used to settle any outstanding debts. The remaining balance, if any, is distributed among the shareholders. However, it is important to note that shareholders are not eligible to receive anything until all creditors have been fully paid.

Before we dive into the process of winding up a company in Bangladesh, it is pertinent to note the term used here is Company but not business, as sole proprietorships or partnership businesses in Bangladesh do not follow the equivalent pathway or practice such method of liquidation or winding-up. Therefore, to continue with the liquidation process one must have an operating company, properly incorporated/registered under Bangladesh law.

Under the provisions of the Companies Act, 1994, there are three modes of winding up a company in Bangladesh. The winding up of a company may either be:

– by the court, or
– voluntarily, or
– subject to the supervision of the court

A company may enter into the process of liquidation not only when it becomes insolvent, but also when the shareholders believe that continuing the business in its current form would not be profitable. In this article, we have detailed the process of voluntary winding up undertaken by the shareholders of the company which is also known as Members’ Voluntary Winding Up.

Voluntary Winding Up

There are two types of voluntary winding up:

– Creditors’ voluntary winding up
– Members’ voluntary winding up

Companies which are solvent enough to settle their debts within 3 (three) years of the commencement of liquidation are eligible to opt for a Members’ Voluntary Winding up. The process goes in the chronological order as follows: