This week Your Advocate is Barrister Tanjib-ul Alam Advocate, Supreme Court of Bangladesh. He is the head of the chamber of a renowned law firm, namely, 'Tanjib-ul Alam and Associates ',which has expertise mainly in commercial law, corporate law, admiralty, employment and labor law, land law, banking law, constitutional law, telecom law, energy law, Alternative Dispute Resolution, Intellectual Property Rights and in conducting litigations before courts of different hierarchies.
Many people do not know that there is a general mode of winding up of company by the Court under section 241of the Companies Act, 1994. For example: some persons have incorporated 7 different companies at a time but they do not run business of any of them for more than 6 years. Those companies are in on their name merely. No sorts of practical activities have ever followed of those companies. Now, the director-shareholders of the company wishes to wind up those companies. Would you please enlighten me about the procedure and the nature of particular undertaking which the aforesaid persons might have taken aftermath for winding up those companies?
The concept of winding up of a company is quite elaborate. This forum may not be suitable to discuss all issues involving winding up. However, I will try to give some basic features of winding up.
There are at least three modes of winding up a company namely (a) by the Court, (b) voluntary and (c) subject to the supervisions of the Court.
A company may be wound up by the Court is six situations namely (i) if the company has by a special resolution resolved that the company be wound up by the Court; or (ii) if default is made in filing the statutory report or in holding the statutory meeting; or (iii) if the company does not commence its business within a year from its incorporation, or suspends its business for a whole year; or (iv) if the number of members is reduced, in the case of private company below two, or, in the case of any other company, below seven; or (v) in the company is unable to pay its debts; or (vi) if the Court is of opinion that it is just and equitable that the company should be wound up.
A company may be wound up by the shareholders voluntarily in the following circumstances, namely (a) when the period, if any, fixed for the duration of the company by the articles expires, or the event, if any occur, on the occurrence of which article provide that the company is to be dissolved and the company in general meeting has passed a resolution requiring the company to be wound up voluntarily; (b) if the company resolves by special resolution that the company be wound up voluntarily; and (c) if the company resolves by extraordinary resolution to the effect that it cannot by reason of its liabilities continue its business, and that it is advisable to wind up.
A company may be wound by the creditors in compliance with the procedure prescribed in section 298-305 of the Companies Act.
Considering the above scenario, I understand that you are interested to know about procedure to be followed by the shareholders to wind up dormant companies. As indicated above, a dormant company may be wind up either under the supervision of the court or by the shareholders voluntarily. If the shareholders of dormant company wishes to avoid going to the Court, they can avail the procedure prescribed under section 287-296 and achieve voluntary winding up.
A voluntary winding up procedure will involve the following steps:
(a) Holding Board Meeting for taking decision on fixing a date of EGM;
(b) Declaration of solvency by all the Directors of the company and delivery of the same to RJSC;
(c) Holding EGM for passing Special Resolution;
(d) Publication of notice of Special Resolution in the Gazette and local newspapers;
(e) Appointment of Liquidator;
(f) Meeting of the shareholders at the instance of the Liquidator;
(g) Audit of the Company and submission of Financial Report to the shareholders;
(h) Distribution of assets to the creditors and contributories if there is any surplus;
(i) Submission of Return to the RJSC.
After three months of submission of the Return by the Liquidator, the company shall be deemed to have dissolved.
Apart from the above mentioned lengthy procedure, section 346 of the Companies Act confers power upon the Registrar to strike defunct company off the register. If any person wishes to avoid the winding up procedure, it may cause the Registrar to invoke its jurisdiction under section 346 of the Companies Act.
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