Amalgamation of Companies / Corporate Restructuring

Bangladesh’s Corporate / Company litigation legal framework is governed primarily by the Companies Act, 1994, which outlines the legal procedures for the incorporation, operation, and dissolution of companies. However, when disputes arise or corporate compliance needs to be rectified through judicial channels, parties must rely on specific sections of this Act and supplementary laws depending on the situation.

At Kazi Law Chamber, we provide end-to-end Corporate litigation support in matters related to company law, drawing upon decades of experience in representing both corporate entities and shareholders before the Company Bench of the Hon’ble High Court Division of the Supreme Court of Bangladesh.

Common Areas of Company Law Litigation

Our firm routinely handles applications, disputes, and compliance corrections, including but not limited to the following areas:

• Alteration of the Objects Clause in the Memorandum of Association

• Rectification of the Share Register

• Reduction of Share Capital 

• Condonation of delay in holding the AGM

• Condonation of delay in filing the Return of Allotment 

• Condonation of delay in registering Mortgages or Charges

• Mergers, Demergers, and Corporate Restructuring

• Mergers & Acquisition

• Protection of Minority Shareholders

• Judicial Winding-Up of Companies

Amalgamation of Two Companies / Corporate Restructuring

The legal mechanism governing the amalgamation, merger, demerger, or any broader corporate restructuring scheme between companies in Bangladesh is primarily contained in Sections 228 and 229 of the Companies Act, 1994. These provisions empower the Court to sanction corporate arrangements, compromises, or reorganisations that are binding on companies, shareholders, and creditors, subject to specific approvals and procedural safeguards.

Under Section 228, if a company proposes an arrangement or compromise with its creditors or members, whether during ordinary business or in the course of winding up, the High Court Division of the Supreme Court may direct that a meeting of the concerned stakeholders be convened. This includes creditors and shareholders, as determined by the Court. If the compromise or scheme is approved by a majority representing three-fourths in value of the creditors or members present and voting, and the Court deems it fair and reasonable, it may sanction the arrangement, rendering it legally binding upon all parties, including dissenting stakeholders and the company.

In support of the arrangement, the Court may also impose a moratorium on legal proceedings, temporarily staying any suits or enforcement actions against the company until the application for the scheme is fully resolved.

Expanding on this, Section 229 of the Act lays out the Court’s power when a scheme is part of a broader reconstruction or amalgamation involving the transfer of undertakings between two or more companies. Upon being satisfied with the scheme, the Court may issue a comprehensive order which may include the following directions:

• Transfer of assets and liabilities from the transferor company to the transferee company;

• Issuance or allocation of shares, debentures, or other securities by the transferee company to the shareholders of the transferor;

• Continuation of pending legal proceedings by or against the transferee company in place of the transferor;

• Dissolution of the transferor company without going through a formal winding-up;

• Resolution of claims by dissenting shareholders or creditors who oppose the scheme;

• Any other orders deemed necessary to ensure the success of the reconstruction or amalgamation.

It is significant to note that when such an order is passed, the transfer of property or liabilities occurs automatically, and the property may even be discharged from existing charges or encumbrances, if so ordered by the Court. This provides a strong statutory foundation for clean, enforceable transfers in corporate reorganisations.

Procedural Framework for court-sanctioned amalgamation or restructuring are detailed and must be meticulously followed.

Proposal and Consent by Majority Stakeholders:

The process begins with a proposal for a compromise or arrangement between the companies involved, usually a transferor and a transferee entity. The scheme must be formally approved by the Board of Directors of each company and consented to by a majority of the shareholders and/or creditors representing more than fifty per cent.

Extraordinary General Meeting (EGM):

Following board approval, a Court-directed Extraordinary General Meeting (EGM) is held involving the shareholders and creditors of both companies. In this meeting, a special resolution is proposed and must be passed by at least three-fourths of those present in value, whether in terms of shareholding or credit exposure. The resolution should include detailed terms of the scheme—structure of share swaps, liabilities assumed, legal treatment of dissenting parties, and post-merger governance.

Application to the High Court Division:

Once the EGM adopts the resolution, a formal application under Section 229 is submitted to the Company Bench of the High Court Division. The application must be accompanied by:

• A verified copy of the scheme of amalgamation or restructuring;

• Audited financial statements of both companies in accordance with the International Accounting Standards (IAS);

• Board resolutions authorising the scheme;

• Affidavits from directors, financial disclosures, and creditors’ consents (if required).

The Court, upon admitting the application, examines the merits, commercial rationale, and fairness of the proposed scheme. The Court may also exercise its inherent powers under Section 151 of the Code of Civil Procedure (CPC) and Rule 8 of the Company Rules, 2009, where necessary to effectuate the restructuring.

If satisfied, the Court sanctions the scheme and issues binding directions, including the transfer of assets and liabilities, the issuance of new securities by the transferee company, and the dissolution of the transferor entity without winding-up. The Court may also direct the publication of the order and compliance filings with the Registrar of Joint Stock Companies and Firms (RJSC).

Kazi Law Chamber regularly advises clients on complex corporate restructuring transactions, including the amalgamation, merger, demerger, and reorganisation of companies under Sections 228 and 229 of the Companies Act, 1994. Our firm assists clients with structuring the proposed scheme, drafting board and shareholder resolutions, coordinating with auditors for financial disclosures, and preparing court applications with the required affidavits, consents, and scheme documentation. We represent clients before the Company Bench of the High Court Division for approval of such schemes and ensure compliance with procedural safeguards, including EGM proceedings, stakeholder approvals, and RJSC filings.

Our corporate lawyers have extensive experience handling a wide range of matters before the Company Bench of the High Court Division, including alteration of the objects clause in the Memorandum of Association, rectification of the share register, reduction of share capital, condonation of delay in holding the AGM or filing the return of allotment, and registration delays involving mortgages or charges. We also advise on complex proceedings involving mergers, demergers, corporate restructuring, minority shareholder protection, and judicial winding-up of companies, offering strategic legal solutions tailored to each client’s business objectives.