An insolvent company’s liquidation can be initiated voluntarily by the company’s directors, or it can be compelled by a court order.

1. Liquidation voluntarily:

As a corporate director, you may come to the conclusion that your company is insolvent and that you need to take action to rectify the issue. If attempting to turn the company around isn’t going to succeed, or if you simply don’t want to, you may choose to put the company into voluntary liquidation. A formal insolvency process is known as a Creditors’ Voluntary Liquidation – or CVL – is used to accomplish this.

2. Liquidation Compulsory:

A firm may be pushed into liquidation in specific circumstances, most commonly due to non-payment of debts to creditors or HMRC. Compulsory liquidation is the term for this. When all other collection efforts have failed, creditors may serve you with a Winding Up Petition, which would ask the courts to have your company compulsorily wound up. This is the most serious action a creditor may take against your business, and it usually happens over a length of time when the creditor has had enough of chasing payment.

A creditor, the business or the company (i.e., shareholders), or a lender can submit a winding-up petition jointly or independently under section 245 of the Companies Act 1994. Section 235 of the Companies Act states that each of the company’s current and previous owners will be obliged to contribute an amount sufficient to cover the business’s debts, liabilities, fees, and liquidation expenditures if the company is wound up. The term contributory is defined in Section 237 as “each individual is obligated to contribute to the assets of a corporation in the event of its winding up.” (For a company’s liquidation or winding up in Bangladesh)

A company may be wound up by the court in the following circumstances: if the company has decided to be wound up by the court through a special resolution; or if the company has failed to file the statutory report or hold the statutory meeting; or if the number of members has fallen below the required number under the Company Law; or the company is unable to pay its debts, or the court believes it is just and equitable to wind up the company.

The second step in a voluntary winding up is to prepare documentation. These are the Profit and Loss Account and Audited Balance, as well as the Declaration of Solvency (which must include information such as whether or not the company has any debts). These documents must be approved by the majority of the company’s directors.

After that, within 5 weeks, the authorized Declaration of Solvency must be filed with the RJSC (Registrar of Joint Stock Companies and Firms).

The next step is for the extraordinary general meeting to approve a special resolution authorizing the company’s winding up and the appointment of a liquidator. This (the meeting’s content) must also be filed with the RJSC. The above-mentioned special decision must be published in the Official Gazette and a newspaper circulating in the district where the company’s registered office is located within 10 days of its passage.

After that, the liquidator must accept the appointment and notify the RJSC and the Deputy Commissioner of Taxes (with jurisdiction) within 30 days of the appointment.

The liquidator must prepare a Final Account detailing the process of winding up and the distribution of assets. After that, the liquidator will summon an extraordinary general meeting. The meeting must be announced by newspaper advertisement at least one month prior to the date of the meeting. This notice must be published in the Official Gazette as well as a newspaper circulated in the district where the company’s registered office is located. In the extraordinary general meeting, a specific resolution on the disposal of the company’s books and documents will be passed.

Finally, a final meeting must be held and all documentation must be submitted to the Registrar.

We are a renowned law firm in Dhaka, Bangladesh, with a staff of highly experienced corporate lawyers who can handle every part of a client’s liquation process. The following services are provided by us:

1. Getting paperwork ready for the winding down;
2. Resolving any legal issues that may arise;
3. Resolving any outstanding commitments;
4. Dispose of business assets and utilize the money to settle debts;
5. Reimbursing any unpaid VAT, bills, or liquidation costs;
6. Attending creditors’ meetings;
7. Taking whatever steps that the winding down committee deems appropriate and necessary.

In banking and economics, liquidation is the process of liquidating a business and allocating its assets to claimants. When a business becomes insolvent, it means it is unable to meet its financial obligations on time. Everyone’s rights are protected under the Companies Act of 1994, including the court’s, firm owners’, liquidators’, employees’, related financial institutions’, debtors’, and creditors’. Everything in the legislation is precise and correct, guaranteeing that it is both long-lasting and adequate for the people.