An objects clause is a paragraph in a company’s Memorandum of Association that specifies the goal and scope of its activities. The object clause’s objective is to define and limit the activities that the corporation is entitled to carry out. Anything that goes beyond those restrictions is considered ultra vires (outside of the company’s legal power or jurisdiction) and may be void.
The method of altering the object clause of a Bangladesh-registered corporation is described below.
STEP ONE: BOARD MEETING EXTRAORDINARY GENERAL MEETING
A board meeting should be convened, and the directors will ratify the proposed change and call an extraordinary general meeting (EGM). The EGM should be announced with 21 days’ notice, unless the shareholders agree to a shorter notice period.
At the EGM, a specific resolution authorizing the change should be adopted.
Returns for the special resolution should be filed with the RJSC along with Form VIII.
Documents include notice of the meeting and resolution (for both the Board Meeting and the EGM), as well as certified copies of Form VIII.
Step 2: Apply to the High Court Division.
An application should be prepared for submission to the appropriate Company Bench of the High Court Division of the Supreme Court of Bangladesh. An affidavit should be submitted in support of the application. The application should include the proposed object clause(s) that support the requested changes in object clauses. It is common to include a brief history of the company’s shareholding structure from conception until the date of filing.
Documents required include the application, certificate of incorporation, certified copies of the MoA and AoA, the most recent certified copies of Schedule X and Form XII from at least two years ago, notice and minutes of the EGM, and a letter of authorization.
Step 3: Admission Hearing.
After filling up the application, the Bench officer will assign it a matter number. The subject will appear on the Court’s daily cause list, and the Court will eventually hear it. The Court may admit the case after hearing the evidence and reviewing the papers. If admitted, the court will order that a legal notice on the admitted matter be published in two daily newspapers, as well as served on the Registrar of Joint Stock Companies and Firms.
STEP 4: Publication of the Legal Notice and Affidavit of Compliance
According to the Court’s ruling, legal notice should be published in the designated newspapers, and copies of the newspapers carrying the advertisement will be collected.
An affidavit of compliance must be given to the court, along with a copy of the legal notice previously published in the relevant publication, within the time frame prescribed by the court. Following the filing of the documents, the case will be added to the court’s daily cause list for hearing.
STEP 5: HEARING AND DONATIONS
The court may issue a final order following the hearing if it deems it appropriate. It is normal for the court to request a gift to a charitable organization. The court may choose the donation amount and charitable organization. After completing the contribution to the charitable organization and presenting compliance to the court, the petitioner will receive the final order.
STEP 6: SUBMISSION TO THE RJSC.
The court’s final order must be filed to the RJSC, after which the modified MoA and AoA will be issued.
In the period of massive development projects in Bangladesh, the bank guarantee method, also known as performance guarantees, is very popular and crucial. As a result, this essay will provide a comprehensive overview of the concept of bank guarantee as well as the legislative provisions governing bank guarantees in Bangladesh.
What is the Bank Guarantee Process in Bangladesh?
A “contract of guarantee” is a contract to perform a third party’s promise or discharge their liability in the event of their default. The “surety” is the person who provides the guarantee; the “principal debtor” is the person whose default is covered by the guarantee; and the “creditor” is the person to whom the guarantee is given. Similarly, when a bank provides any security, the security is known as the bank guarantee.
A bank guarantee ensures that the third party’s liabilities are met. In other words, if the third party fails to meet its responsibilities, the bank will cover it. In summary, a bank guarantee can be defined in the manner described above; nevertheless, the definition of a bank guarantee is considerably broader than that.
In Bangladesh, there are numerous case laws that have defined the term ‘bank guarantee’. Nonetheless, the most recent case, ABB India Limited vs. Power Grid Company of Bangladesh Limited and others in 2020, established clear principles on bank guarantee difficulties. As a result, our paper will be based on interpretations of this case, as well as references to other recent cases involving bank guarantees.
In Bangladesh, there are numerous case laws that have defined the term ‘bank guarantee’. Nonetheless, the most recent case, ABB India Limited vs. Power Grid Company of Bangladesh Limited and others in 2020, established clear principles on bank guarantee difficulties. As a result, our paper will be based on interpretations of this case, as well as references to other recent cases involving bank guarantees.
How is a Bank Guarantee formed?
The steps for forming a bank guarantee are briefly described here.
(i) The applicant requests that the bank guarantee their performance (ii). The bank then enters into an agreement with the beneficiary at the request of the applicant.
(iii) In the deed of bank guarantee, the bank guarantees to pay a specific amount as specified in the deed of bank guarantee upon demand by the beneficiary if the applicant fails to execute as per the contract.
Things to consider before signing a Bank Guarantee Agreement
When a beneficiary enters into a bank guarantee arrangement, it is critical that the following factors are taken into account, particularly when foreign entities obtain bank guarantees from banks outside of their native country. The key items to consider are listed below:
(i) Terms and Conditions of the Bank Guarantee Agreement
(ii). Terms and conditions linked to the extension of bank guarantees, such as the method for extending the guarantee period, the number of times it can be extended, and so on.
iv) What documents are necessary for the bank guarantee?
(v) The time period required to encash the bank guarantee.
(vi). Determine whether the bank guarantee agreement contains an arbitration clause. This section expedites the resolution of any dispute.
(vii). It is also critical to verify the validity and credibility of the bank that will serve as the beneficiary’s guarantee.
Laws governing bank guarantees
According to Bangladeshi case law, the most important thing to note about a bank guarantee is that it is an independent deed of the contract between the bank and the beneficiary, even if the bank engages into the contract on behalf of a third person (application). The following are a few crucial aspects to remember about bank guarantees from the recent case of ABB India Limited vs. Power Grid Company of Bangladesh Limited and others in 2020:
(i) A bank guarantee is an agreement between the bank and the recipient.
(ii). The applicant or third party is not a party to the bank guarantee agreement.
(iii) The bank guarantee agreement is independent of the agreement between the beneficiary and the applicant (iv). A bank guarantee is an irrevocable pledge granted by a bank to pay an amount in behalf of its beneficiary as and when the beneficiary makes a demand, regardless of any dispute between the applicant and the beneficiary on the underlying contract.
(v) Whenever the beneficiary makes a demand to encash the bank guarantee, the bank is obligated to pay the money immediately.
(vi) A guarantor’s obligation to pay under the guarantee is not subject to claims or defenses based on any relationship or contract between the third party and the beneficiary.
(vii). As a result, there is no way to prevent its encashment by the bank, much alone a third party. This is because the third party/applicant is not a party to the bank guarantee arrangement.
(viii) The encashment of a bank guarantee cannot be prevented on the basis of financial loss or corporate reputation because financial disputes can always be settled in arbitration.
(ix) In certain circumstances, the court has prolonged the bank guarantee period even after it expired while the court procedures were underway. In the case of Loyal Shipping (Pvt.) Ltd., represented by Siraj-Ud-Dowlah and others, vs. M.V. Anangel Wisdom and others, the court ordered an extension of the bank guarantee despite the fact that the request for an extension of the validity of the bank guarantee or a new bank guarantee was made after the bank guarantee had expired.
exceptions to the law of bank guarantees
The bank can only stop the encashment of a bank guarantee if it receives a dispute. Only the bank has the authority to file a legal and genuine dispute about the encashment of a bank guarantee if—
(i) The wrong individual invokes the encashment of the bank guarantee, or (ii). The bank discovers any other discrepancies in the bank guarantee.
Judicially sanctioned exception to stop bank guarantee.
In general, no injunction can prevent a bank guarantee from being encashed. According to ABB India Ltd vs Power Grid Company of Bangladesh Ltd and others (2020), the court is authorized to prohibit the encashment of bank guarantees only when—
(i) A clear case of fraud in the establishment of the bank guarantee (Himadri Chemicals Industries Limited vs Coal Tar Refining Company (2007) 8 SCC 110). and
(ii) The encashment shall cause irreversible loss that cannot be compensated or restored if eventually succeeds (U.P. Coop, Federation Ltd vs Singh Consultants and Engineers (P) Ltd (1988) 1 SCC 174).
Our country’s courts will give injunctions in any legal dispute, such as a bank guarantee, if the petitioner can demonstrate that there is an arguable case for the applicant and the loss cannot be recovered or repaid. Read the Bank Guarantee Reference.
TRW provides legal services relating bank guarantees. TRW’s Barristers, Advocates, and Lawyers in Mohakhali DOHS, Dhaka, Bangladesh have extensive experience guiding clients through the whole process and legal regulations governing Bank Guarantees in Bangladesh. Do you require assistance with any services? Contact us for legal assistance.
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Winding up a company in Bangladesh – Full process and relevant cases in 2024
In Bangladesh, the winding up of a firm can be either:
Options include voluntary, court-ordered, or subject to court monitoring. Except for creditor voluntarily winding up, solvent companies are usually the ones to wind up.
A declaration of solvency must be produced and signed by the directors. The declaration will include a disclosure of the company’s assets and liabilities as of the latest predictable date before the declaration. The declaration will also say that the company has no debts or that it will be able to pay its debts in full within two years of the start of the winding-up process.
The declaration must be accompanied by an affidavit indicating that the directors conducted a thorough investigation into the company’s activities. The declaration will be signed by all of the company’s directors, or the majority of the directors if there are more than two.
Accounts & Audit
The Profit and Loss Account and audited Balance Sheet shall be prepared and audited up to the most recent predicted date as specified above. The auditor’s report should be requested.
Second Step: Board Meeting and Extraordinary General Meeting.
Board Meeting
A board meeting will be held in accordance with the regulations of the Companies Act and the company’s Articles. The majority of directors should be present at the meeting. During the meeting, the directors will approve:
a. Accounts were audited.
b. The declaration of the directors.
The directors will also convene an extraordinary general meeting to enact a special resolution to wind up the firm. Following the meeting, the declaration and affidavit (completed in the first step) should be notarized.
Second STEP : FILLING THE DECLARATION WITH THE RJSC
The declaration must be filed with the Registrar of Joint Stock Companies and Firms within 5 weeks after the date of the declaration.
EXTRAORDINARY GENERAL MEETING.
An extraordinary general meeting will be conducted, and the special resolution will be approved. The special resolution will authorize the following: i) winding up; ii) appointment of the liquidator; and iii) liquidator’s remuneration.
FILLING WITH RJSC
The proceedings of the extraordinary general meeting (together with Form VIII) and the appointment of the liquidator will be filed with the RJSC.
THIRD STEP: APPOINTMENT OF THE LIQUIDATOR
LIQUIDATOR
After the special resolution is passed, the liquidator will accept the appointment, take office, and ensure that RJSC is notified of his or her appointment.
Within thirty days of being appointed as liquidator, the liquidation will notify the Deputy Commissioner of Taxes with jurisdiction to assess the company.
GAZETTE PUBLICATION:
Notice of any special or extraordinary resolution for voluntary winding up of a company shall be given by the company within ten days of its passing by advertisement in the official Gazette, as well as in a newspaper circulating in the district where the company’s registered office is located. The appointment of the liquidator should also be announced in the advertisement.
AGM (IF REQUIRED).
In the event that the winding up continues for more than one year, the liquidator shall arrange an Annual General Meeting of the company at the end of the first year from the commencement of the winding up and of each succeeding year, or as soon thereafter as may be convenient within ninety days of the close of the year, and shall lay before the meeting an account of his acts and dealings and of the conduct of the winding up during the proceeding year, as well as a statement
FOURTH STEP: FINAL MEETING AND FILING WITH THE RJSC
FINAL ACCOUNT
The liquidator will prepare a final account of the winding up, outlining how the winding up was carried out and the company’s assets were disposed of. Then s/he will convene an extraordinary general meeting.
EXTRAORDINARY GENERAL MEETING.
The meeting will be announced through an advertisement in the official gazette and a newspaper circulating in the district where the company’s registered office is located, detailing the time, venue, and purpose of the meeting at least one month in advance.
Within one week after the winding up meeting, the Registrar of Joint Stock Companies and Firms will receive a return.
After the final meeting and the submission of the documents to the Registrar, the company’s legal entity will be dissolved.
Company Law Winding up cases?
Winding up is the process of dissolving a business. When a commercial organization closes, it ceases to function normally. The typical goals are to liquidate stock, settle debts, and distribute any leftover assets to partners or shareholders. The phrase is most commonly used in the United Kingdom, where converting assets into cash is known as liquidation.
In other words, this method generates a cash pool that a corporation can utilize to pay off debts and other outstanding bills before distributing the leftover funds to shareholders, corporate members, investors, and other investors. A receiver, often known as a “liquidator,” may be appointed to manage the asset distribution process. Company Winding-Up Act in Bangladesh
Amin Md. Vs. Bengal Shipping Line Ltd., 50 DLR (2008), p. 444.
The need to protect a company’s goodwill as well as the interests of Al and other shareholders has resulted in the emergence of extensive law supporting the idea that even admission of winding-up motions should be granted judiciously and not as a matter of course.
Winding up Company Law Cases
Dira Dockyard and Engineers Ltd versus Bangladesh Shilpa Rin Shongstha and others, 10 BLC (AB) 131
The contention that the decree obtained by respondent no. 1 was not executable and that the process of debt realization had become barred by law, and thus the order of winding up and liquidation of the Company was not legally maintainable, is of no substance because no such contention was brought before the High Court Division, nor were any particulars presented to the Appellate Division to substantiate the contention above.
In such a circumstance, the petitioners’ purpose for bringing the petition is completely immaterial and should not be considered.
Moksudur Rahman v. Bashati Property Development Ltd., 5 BLC 245.
Half of the board is made up of the petitioner; rather, two of the four directors are the petitioners, who own half of the shares and thus do not have the right to invoke the court’s jurisdiction under Section 233 of the Companies Act of 1994.
Rohimuddin Ahmed vs. Bengal Water Ways Ltd. (1979), 31 DLR 28
Some grounds which justify the dissolution of the company: Section 162 of the Companies Act, 1913 (corresponding to sec 241 of the Companies Act, 1994) provides for the winding up of a company on six grounds, three of which are quoted below as they are found present in this case: (iv) if the default is made in filing a statutory report or in holding statutory meetings, (v) if the company is unable to pay its debt, (vi) if the Court is of opinion that it is just and equitable
The High Court Division was well aware of the Company’s massive loan liabilities and believed that they needed to be halted, as well as the provision of section 241 (v) (vi) of the Companies Act, which deemed it just and equitable to order the Company’s winding up. As a result, the application to wind up the Company was approved, the official receiver was appointed as the liquidator, and other incidental orders were issued.
Where the allegations in the petition, which are supported by evidence, reveal the company’s complete inability to pay off creditors, an ever-increasing burden of interest, and control of the business as a result of sharp differences among the shareholders, the court is fully justified in issuing a winding-up order.
The winding up process is serious. The winding-up problem is a serious subject, as evidenced by a thorough reading of Part V of the Act, and the Privy Council’s concern in the event of an unwarranted winding-up order may be seen.
The Court has the option to wind up a firm, which it may refuse to do based on the preferences of the majority or because it is solely beneficial to the petitioning creditor and not to all creditors in general.
Bangladesh Tyres Limited. Vs. Agrani Bank and Others, 42 DLR 474.
A limited corporation is a legal entity that lives, operates, and functions under the provisions of a statute; a death warrant can be issued under the same statute. The death warrant in the form of winding up should be used sparingly. Last-ditch measures should be taken to save a company from liquidation.
Yunus Bhuiyan and Others vs. Bashati Property Development Ltd., 4 BLC 249.
Winding up of the company on just and equitable grounds- Because there is total misunderstanding among the directors and total deadlock in the Company’s business, and there is no change in any compromise between the two groups of Directors, the Company is liable to be wound up on just and equitable grounds, for the ends of justice, and for the benefit of all concerned.
Bangladesh Waterways Ltd. Vs. Rahimuddin Ahmed (1982), 34 DLR (AD) 47.
A private limited corporation can be dissolved using the same criteria as a partnership.
A. Gaffer Limited vs. Enjari Garments (Pvt) Ltd., 8 BLT (HCD) 295
The respondent admitted to a sum of TK. 9,55,941.00 was owed to the petitioner up until November 1997, of which the respondent paid a total of TK 1,00,000.00, resulting in an admitted responsibility of respondent No. 1 to the petitioner of TK 8,55,941.00- Held: the respondent corporation is unable to pay its admitted debt of TK. 8,55,941.00, and hence it is likely to be wound up.
Rahimuddin vs. Bengal Watennays Ltd. (1974), 26 DLR 285.
An application to wind up a private limited company (controlled by two shareholders) was denied because there was no basis to believe that doing so was just and equitable. However, the specific circumstances of the case necessitated an assurance from the respondent that he would behave in such a way that the other sharer’s interests would be unaffected.
Where the petitioner has alternative remedies for redressing his grievance under the Act’s provisions, ordering winding up is not just and equitable.
Bangladesh Shilpa Bank vs M/s. S.S. Mujibullah (1977), 29 DLR 67.
When all of the mortgagor firms’ assets and property are assigned and mortgaged to the Bank, and precise remedies and processes are provided in the P.O., there is no reason to invoke section 162 of the firms Act. 129 of 1972. A temporary incapacity to repay debt should not be used to wind up a corporation, as this is contrary to state policy.
The loan was not the directors’ personal loan, but that of the corporation. The corporation should have paid the petitioners the unpaid balance. The petitioners are creditors and so entitled to a winding-up order.
Amin Scales Limited. Vs. Md. Yakub, 39 DLR(AD) 201
Admitting an application followed by standard announcements in gazettes and newspapers is likely to cause concern among the company’s creditors, drive away consumers, and cripple its activity.
The Court’s discretion to decline to issue an order for the winding up of the firm where applicable. The corporation was unquestionably losing money year after year, and its mills had been closed since 1983. The Court was correct in deciding that it was just and equitable to wind up the corporation.
Bangladesh Tyres Limited. Vs. Agrani Bank and Others, 42 DLR 474.
The appellant company’s counterclaim for money questioned the maintainability of the application for winding up on the basis of incapacity to pay bills. The Court determined that the counter-claim was only an accusation, as no proof was presented in support of it. Such a counter-claim was unacceptable.
Bashati Property Development Ltd vs. Younus Bhuiyan and Others, 4 BLC (AD) 236.
Respondent No. 1 has made a strong case for winding up, which has been accepted by the learned Company Judge. The petitioners now seek to rely on their supplementary affidavit and application under Section 233 of the Companies Act, which they did not present to the learned Company Judge during the ultimate hearing, nor are they aggrieved by the learned Company Judge’s failure to consider these documents.
Motiur Rahman vs May Industries Ltd., 37 DLR 41
Winding up a company’s order must be based on existing facts rather than what they were great at.
Sayeda Haque vs. Shams Ltd and Others, 6 MLC 748
Since the Shams Limited company should never carry on its business and cannot carry on business in the future, it would be just and equitable to pass an order for the company’s winding up, and the official liquidator would take over the company’s assets and proceed with the liquidation proceedings by law.
Nizamul Haqque and others vs. Singa-Bangla Garment Manufacturing Co. (Pvt. Ltd.), BLD 1991 (HCD 49)
Neglect to pay rent-A petition for winding up might be filed if rent is not paid on time. Because the company is unable to pay its confessed liability and the application procedures have been followed, the company is likely to be wound up.
Mazharul Haque vs. Bulk Management (Bangladesh) Ltd. and others (48 DLR 453)
The petitioner has not demonstrated how he will benefit or minimize some disadvantage from the winding up of the respondent corporation, and hence has no locus standi for its winding up.
Abdul Hamid scores one. Dhakeswari Cotton Mills Ltd. and another, BCR 1983 HCD 320
Held that no provision of the Companies Act relating to company winding up shall apply to any scheduled industrial concern under P.O. No. 27 of 1972.
Consumer Testing Laboratories Ltd vs. Registrar of Joint Stock Companies and Firms, 16 BLC 224
Referring to Section 253 of the Act, the learned Advocate for the Petitioner contends that the Court has the authority to halt the winding-up process entirely if it so chooses. The winding-up process in respect of Consumer Testing Laboratories Limited is directed to deliver over the Company’s assets and properties, both moveable and immovable, to the shareholders within four weeks of receipt of the certified copy of this order.
Cathay Pacific Airways Limited vs Vantage International Limited, 30 BLD (HCD) 589
The application to wind up the corporation is allowed. In this case, the corporation makes no claim that it did not collect the funds from the sale of passenger tickets and cargo freight on behalf of the petitioner. Furthermore, the company has not disowned the Statements issued by it in October, November, and December 2006, but rather disputes the authority of the concerned official to sign the Statements in question, claiming that the concerned officer issued such Statements at the petitioner’s request to take unfair advantage of the situation.
Ella Textile Mills Ltd v. Md Abdul Awal, 38 DLR (AD) 26.
Prayer for correction of share-register—When a winding-up order is issued, the rectification prayer must be denied.
Amir Hossain vs. Homeland Footwear Ltd & Others, 55 DLR 478
A court can make a winding-up order for a corporation at its discretion, but under section 250 of the Act, no suit or other legal procedures against the company may be pursued or initiated unless the court grants leave. If the process under Section 241 of the Companies Act meets the criteria of the law, it will undoubtedly find its mark and will not be denied or deflected because the petitioner has alternative equally effective remedies accessible to him in another place.
BRTC vs. Ashraf Jute Mills Ltd, 45 DLR 282.
When a process before the High Court Division is pending under Section 162 of the Companies Act, the fate of the Company, including its assets and obligations, as well as the interests of all creditors, secured or otherwise, and the shareholders, is under consideration by the court.
Eastern Bank Limited vs. Bangle Carpets Ltd. (48 DLR 392)
Based on the respondent company’s conduct and the manner in which promises were made, assurances were given, and new repayment schedules were chalked out only to be broken, giving the impression that the company’s affairs are not clean and above board, the opinion is that the respondent company is unable to pay its debt and that it would be just and equitable to wind up the company. As a result, the respondent corporation is ordered to be wound up immediately.
Thai Airways International Limited versus Air Route Service Limited and others, 48 DLR 412.
The responder corporation is an outright defaulter who is unable to repay the loan. After reviewing the documents on record and the Advocate’s submission for the petitioner, it appears that it is just and proper to wind up the respondent corporation.
Vega Sweater (Pvt.) Ltd. and Associates. Vs. Agrani Bank, 8 BLT (HCD 226)
The firm is a Private Limited firm, and the quorum required for the transaction of the Directors’ business shall be two; however, because the company’s Articles of Association state that the business of the Board of Directors is two, the company has been unable to conduct business. And the company’s operations have been halted for almost a year. The company is currently unable to pay its debts, therefore it is right and equitable to wind it up.
The Court will assess the matter as a whole based on the materials provided. There is no possibility for rectification of the share register under section 38 of the Act, as suggested on behalf of the respondent, once the petitioner has established his case for winding up the company.
Tamanna-e-Jahan vs. Paper Converting & Packaging Ltd. & Others, 10 BLT (HCD 450)
Petitioner is a magazine publisher, and respondent No. 1 is a limited liability company engaged in the business of publishing, printing, and packaging. Held: there is a bona fide dispute regarding the existence and amount of the debt, and the petitioner is unable to determine the same through the winding up process.
Bangladesh Consumers Supplies Company Ltd vs. Registrar, Joint Stock Co., 46 DLR 552
When the government conducts commercial or trading business through a company, it does not act as a department or organ of the government in its administrative capacity, and such a company meets all of the qualifications of a company under the Companies Act, and the petition for its winding up is competent.
Ambala Cold Storage (Pvt) Limited. Vs. Prime Insurance Company. Ltd, 56 DLR 422.
Sections 241 and 242- The claim is not undisputedly established, and until it is admitted, it cannot be regarded to be a debt, and the responding firm is obligated to pay it. Winding up a firm by Court for Debt is not required where there is a genuine dispute about the existence of the debt.
SMM Yusuf vs. Bismillah Shipping Lines (Pvt.) Ltd. and Others, 5 BLC 603
Admittedly, no Annual General Meeting or other meeting has been held since the Company’s incorporation about 14 years ago, and no return has been submitted to the Register of Joint Stock Companies, and the heirs of the deceased shareholder have not been included as members of the company, and it has turned into a non-man company from the start. In such circumstances, it is just and equitable that the company be wound up.
The 6 Essential Elements of a Contract Under Bangladeshi Law
As in many other jurisdictions, a Contract Under Bangladeshi Law is considered legally enforceable when it incorporates six essential elements: Offer, Acceptance, Awareness (also known as Consensus Ad Idem or a meeting of the minds), Consideration, Capacity, and Legality. It is crucial that all six elements are present; a contract lacking any one of these elements can be deemed invalid and unenforceable.
This article provides a detailed explanation of each element and its importance in the context of Bangladeshi law. Please note that this information is for general purposes only and does not constitute legal advice.
What is a Contract?
In its simplest form, a contract is an agreement intended to be enforceable by law. The process of getting all necessary parties to sign a finalized agreement is called contract execution.
The Elements of a Contract
To ensure that your agreement is enforceable under Bangladeshi law, it must include the following six elements:
Offer
An offer is a clear statement of terms by which the offeror (the party making the offer) is willing to be bound. Without an offer, there can be no acceptance and thus no contract. The offer must be communicated to the offeree (the party to whom the offer is made) and must express the terms on which the offeror is willing to be legally bound.The offer marks the start of the contract process. Upon receiving an offer, the offeree can accept, negotiate, clarify, ignore, or reject the offer. It is important to understand the other party’s contract processes, as different offerors may handle counteroffers differently—some may see them as automatic terminations of the original offer, while others may not.
Acceptance
Acceptance occurs when the offeree agrees to the specific terms and conditions proposed by the offeror. For acceptance to be valid, it must be unequivocal and correspond precisely with the terms of the offer.Acceptance can be explicit, where the offeree provides a clear affirmative statement, often by signing the contract. Alternatively, acceptance can be implicit, where the offeree’s actions indicate agreement. While implicit acceptance may not have the same legal status as explicit acceptance, it can still create an implied contract enforceable under certain circumstances.
Awareness (Consensus Ad Idem)
Awareness, or consensus ad idem, refers to a meeting of the minds where both parties fully understand and agree to the contract terms. Both parties must acknowledge the existence of the contract and agree to be bound by its terms of their own free will.If awareness cannot be established, the contract may be voided and unenforceable. This element helps protect against undue influence, deception, or fraud, ensuring that both parties willingly and knowingly enter into the agreement.
Consideration
Consideration is what each party promises to give or do as part of the contract. It represents the value exchanged between the parties and can include goods, services, money, or other things of value. For example, in a contract to buy a car, the buyer’s consideration is the money paid, and the seller’s consideration is the car.Under Bangladeshi law, consideration is a critical component for the validity of a contract. According to Section 2(d) of the Contract Act 1872, consideration is defined as follows:”When, at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called a consideration for the promise.”This legal definition underscores that consideration can be past, present, or future and must involve some detriment to the promisee or a benefit to the promisor.The principle of consideration ensures that there is a mutual exchange of value, which is fundamental to the concept of a binding agreement. Without consideration, a contract typically cannot be enforced, as it would lack this essential element of reciprocity.
Capacity
Capacity refers to the legal ability of the parties to enter into a contract. All parties must have the mental and legal capacity to understand the contract terms and the consequences of their agreement.Individuals who may lack capacity include minors, individuals under the influence of drugs or alcohol, and those who do not understand the language of the contract. Ensuring capacity is crucial as it confirms that each party fully understands what they are agreeing to.
Legality
The contract’s purpose and terms must comply with Bangladeshi law. Contracts involving illegal activities or goods are not enforceable. Additionally, contracts must adhere to public policy and cannot contravene any statutory provisions.
Why TRW Law Firm is the Best for Contract Agreements
TRW Law Firm stands out as a premier choice for handling contract agreements in Bangladesh for several compelling reasons:
Expertise and Experience: TRW Law Firm boasts a team of highly experienced lawyers who specialize in contract law. Their deep understanding of the legal intricacies involved in contract formation, execution, and enforcement ensures that your agreements are robust and compliant with all relevant laws.
Comprehensive Legal Services: The firm provides a full range of services related to contracts, including drafting, reviewing, negotiating, and litigating contract disputes. This comprehensive approach ensures that all aspects of your contractual needs are addressed efficiently and effectively.
Tailored Legal Solutions: TRW Law Firm understands that every client and every contract is unique. They offer personalized legal solutions that are tailored to meet the specific needs and objectives of their clients, ensuring that the contracts are not only legally sound but also aligned with the clients’ business goals.
Strong Track Record: The firm has a proven track record of successfully handling complex contract matters for a diverse clientele, including multinational corporations, small businesses, and individuals. Their success stories and client testimonials speak volumes about their capability and reliability.
Commitment to Client Satisfaction: TRW Law Firm prioritizes client satisfaction by maintaining transparent communication, providing timely updates, and offering strategic advice. Their client-centric approach ensures that clients are well-informed and confident in their legal decisions.
Legal Compliance and Risk Mitigation: The firm’s lawyers are adept at identifying potential legal risks and ensuring that all contracts comply with Bangladeshi laws and regulations. This proactive approach helps in mitigating risks and avoiding future legal complications.
Efficient and Effective Resolution of Disputes: In the event of a contract dispute, TRW Law Firm’s skilled litigators and negotiators work diligently to resolve issues efficiently, whether through litigation, arbitration, or mediation. Their expertise in dispute resolution ensures that clients’ interests are protected and upheld.
By choosing TRW Law Firm, clients can be confident that their contract agreements are in capable hands, backed by legal professionals who are dedicated to achieving the best possible outcomes.
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Are you considering expanding your manufacturing operations to Bangladesh? With its growing economy, strategic location, and favorable investment climate, Bangladesh has become an attractive destination for setting up new factories. However, navigating the legal and regulatory requirements can be complex and daunting. That’s where TRW Law Firm comes in. With our expertise and experience, we can guide you through the entire process, ensuring smooth and hassle-free establishment of your factory. In this article, we’ll deep dive into the various legal and regulatory aspects of setting up a new factory in Bangladesh, and explain why TRW Law Firm is the best choice for your legal needs.
In order to meet the structural/building safety standards every factory in all the targeted sectors need the building permit from RAJUK/city corporation/development authorities according to the factory location.
• The business or factory owners have to submit a number of documents such as Drawing AutoCAD (DWG), City Survey Porcha, Copy of Allotment Letter, Copy of Duplicate Carbon Receipt (DCR), Environment clearance, Key Point Installation Defense Committee (KPIDC) clearance copy, and an exhaustive list of other relevant documents.
In order to get fire safety license and fire safety plan, entrepreneurs need to submit the filled-in prescribed form with the necessary documents such as trade license, land deed, approved building design, and NOC (no objection certificate) safety plan, among others.
• To fulfil environmental safety compliances, factories need to collect the Environmental Clearance Certificate from the Department of Environment (DoE).
Requirements for building permit from RAJUK
Mandatory Documents
Other Documents
Clearance
Certificate
Indemnity Bond Drawing AutoCAD(DWG)
Action taken according to Gadget City Survey Porcha Copy of Allotment Letter Copy of Duplicate CarbonReceipt (DCR) Copy of Power of Attorney Dhaka Transport Co-ordination Authority FAR Calculation Document Instrument documents Letter of Gov. allottedLand/Plot Mutation copy NID copy
Civil Aviation clearance copy Clearance Certificate NOC from different authorities Clearance from the Department of Housing and Public Works Environment clearance Key Point Installation Defence Committee(KPIDC) clearance copy Special Security Force(SSF) clearance copy Titas ClearanceCertificate
City Corporation Certificate DC Traffic Certificate Developer’s RAJUKEnlistment Certificate Electricity Certificate Enlistment Certificateof Civil Engineer Fire Service Certificate Land Use ClearanceCertificate Special ProjectPermission Certificate WASA Certificate
Requirements for building permit from RAJUK (Cont.)
Drawing and Map
DEED (Whichever required)
Tax and Signature
Others
Ammonia Sheet (JPG) Auto Cad (DWG) Old Drawing (for 3RC) Draft survey map Gazette wise map and deeds description Mouza map Plot joining map
Land tax copy Holding tax receipt Engineer signature copy
Architect Signature Copy If any other queries related to construction permit Plot joining paper Revisional Settlement(RS) Porcha Soil test Report (ifany) Undertaken papers Owner’s photo
Building Permits: City Corporations
• City corporations also have the authority to issue building permits for factories. In this report only Dhaka City Corporation (DCC) and Narayonganj City Corporation (NCC) are covered as these are the most factory dense industrial areas
Required Documents for construction permit from Dhaka City Corporation (DCC)
License name
Required document
Construction permit from DCC
Filled up No objection Certificate (NOC) for multistoried building application (For the areas under Dhaka North City CorporationTk 250 has to be submitted as the application fee through challanIf the land owner is not applying by himself and nominating someoneon his behalf then the attested copy power of attorneyLand ownership documentAttested copy of holding taxThe drawing and design of the buildingAs per the format of the agreement mentioned in the form on a non-judicial stamp equivalent to tk 300
Relevant Required Licenses for setting up a factory in Bangladesh
Name Clearance Certificate: This certificate is obtained from the Registrar of Joint Stock Companies and Firms (RJSC). It verifies that the proposed name for your factory is unique and not already registered by another entity. The process involves submitting an application to RJSC, along with the desired name for your factory. If the name is available, RJSC will issue the clearance certificate.
Export Registration Certificate (Permit): This certificate, issued by the relevant authority, allows your factory to engage in export activities. The process typically involves submitting an application to the Export Promotion Bureau (EPB) along with necessary documents such as company registration, tax identification number, and business plan.
Import Registration Certificate (IRC): Similar to the export registration certificate, the IRC is required for importing goods into Bangladesh. The process involves applying to the Chief Controller of Imports and Exports with relevant documents such as company registration, trade license, and tax identification number.
Value Added Tax (VAT) Registration Certificate: Obtained from the National Board of Revenue (NBR), this certificate is necessary for collecting and remitting VAT on sales of goods and services. The process involves submitting an application to the VAT Commissionerate along with required documents such as company registration, trade license, and bank solvency certificate.
Trade License (for Manufacturing): Issued by the local municipal authority, a trade license authorizes your factory to carry out manufacturing activities within a specific jurisdiction. The process involves applying to the respective local authority with necessary documents such as company registration, building construction approval, and environmental clearance.
Tax Identification Number (TIN): This unique identification number is assigned by the tax authority (NBR) to track tax-related activities of businesses. The process involves submitting an application to the respective tax circle office along with relevant documents such as company registration, memorandum of association, and bank solvency certificate.
Export Promotion Bureau (EPB) Enrollment Certificate: This certificate is obtained from the EPB and is necessary for availing export promotion schemes or incentives. The process involves applying to the EPB with necessary documents such as company registration, export-import license, and business plan.
Bank Solvency Certificate: Issued by a bank, this certificate confirms your factory’s financial solvency and ability to meet financial obligations. The process involves submitting an application to your bank along with necessary financial documents such as balance sheet, income statement, and bank statements.
Article of Memorandum: This document outlines the objectives, structure, and rules governing your factory’s operations. It is prepared and filed during the company registration process with RJSC.
Certificate of Incorporation: Issued by RJSC, this document certifies that your factory has been legally incorporated and recognized as a separate legal entity. The process involves submitting an application for company registration along with necessary documents such as memorandum and articles of association, board resolution, and director’s details.
BOND License & General BOND: If your factory will operate in a bonded warehouse or engage in bonded manufacturing, obtaining a BOND license is essential. The process involves applying to the relevant authority (e.g., Customs Authority) with necessary documents such as company registration, factory layout plan, and security arrangements.
PDB Testimonial: This testimonial confirms that your factory meets the necessary requirements for electricity connection. The process involves applying to the Power Development Board (PDB) with necessary documents such as factory location details, load requirements, and electrical layout plan.
BIDA Registration (Local and Foreign Investment Projects): The Bangladesh Investment Development Authority (BIDA) registration is required for both local and foreign investment projects. The process involves submitting an application to BIDA along with necessary documents such as project proposal, feasibility study, and environmental impact assessment.
Ad-hoc IRC/BIDA Recommendation/BIDA Suparishnama: These documents may be required for specific types of investment projects and approvals from BIDA. The process involves applying to BIDA with necessary project details and supporting documents.
Bonded Warehouse License: If your factory will operate a bonded warehouse, obtaining a bonded warehouse license is necessary. The process involves applying to the Customs Authority with necessary documents such as factory layout plan, security arrangements, and bond agreements.
Police Clearance Certificate: This certificate verifies that the directors and key personnel of your factory have no criminal record. The process involves applying to the local police department with necessary personal details and identification documents.
Construction Certificate: If your factory will involve construction activities, a construction certificate may be required to ensure compliance with building regulations. The process involves obtaining approval from the relevant municipal authority after submitting building plans and other necessary documents.
Registration Certificate of Patent, Trade Marks, and Copyright: If your factory will produce patented products or use trademarked logos, obtaining registration certificates is necessary to protect intellectual property rights. The process involves applying to the Department of Patents, Designs, and Trademarks with necessary documents such as product designs, logos, and copyright statements.
Work Permit for Foreign Nationals: If your factory will employ foreign nationals, obtaining work permits is essential to ensure legal employment status. The process involves applying to the Department of Immigration and Passports with necessary employment details and visa documents.
Overall, the process of obtaining these certificates and registrations involves thorough documentation, compliance with regulatory requirements, and coordination with relevant authorities. With TRW Law Firm by your side, you can navigate these complexities with ease and ensure timely establishment of your factory in Bangladesh.
Audits/standards in the export-oriented RMG sector
After the Rana Plaza incident, a new public and private audit administration was introduced as the third phase of the factory inspection system in Bangladesh
As part of this, the Accord and Alliance on Fire and Building Protectionprogramme was formed
The national safety standards are the minimum, and the audits go beyondthat
In the RMG sector, RMG Sustainability Council (RSC), Amfori, Okotex, ISO 100 are the most familiar names that conduct audits.
The BGMEA has partnered with the BKMEA to develop a unified code of conduct for the RMG industry as multiple audits usually create confusions
This unified audit will be carried out a thorough assessment of the feasibility of a common code of conduct for social audits
• These include national laws, rules, policies, international conventions such as the United Nations Guiding Principles (UNGPs), and buyers code of conduct and third-party audit protocols
RSC is a private national tripartite initiative to continue the significant accomplishments in workplace safety further in Bangladesh.
• It conducts structural, electrical, fire and life safety and boiler safety inspections, along with operating an independent occupational safety and health complaints mechanism available to workers in covered RMG factories
• Under the Technical Remediation Guidance of RSC, they have Electrical Single Line Diagram Guidance, Fire Rating Requirement of Steel Construction, Fire Safety Testing and Commissioning Verification Inspection Guidance, Glossary Of Terms, Information Sheet on Third-party Certificates for Fire Safety Systems
RSC Fire Safety Manual for RMG Buildings
RSC Guidance on Product Certification and Certification Marks
RSC requirements: Extension of Factory Buildings
RSC Boiler Safety Programme: Summary of findings of External VisualInspection, Technical Guidance on Verifying Passive Fire Protection Measures (Intumescent Paint or Cementitious Coating) on Steel Building and many more
Audits/standards in the export-oriented RMG sector
Required documents for Audits
Audit Name
Requirements
Amfori
Performance area 1: Social Management System and Cascade Effect Performance area 2: Workers Involvement and Protection Performance area 3: The rights of Freedom of Association andCollective Bargaining Performance area 4: No Discrimination Performance area 5: Fair Remuneration Performance area 6: Decent Working Hours Performance area 7: Occupational Health and Safety Performance area 8: No Child Labour Performance area 9: Special protection for young workers Performance area 10: No Precarious Employment Performance area 11: No Bonded Labour Performance area 12: Protection of the Environment Performance area 13: Ethical Business Behaviour
Audits/standards in the export-oriented RMG sector
Incorporation Certificate Factory License Trade License Fire License EPZ Permission (Only for EPZ Area) Boiler License Generator Waiver/ License Environment ClearanceCertificate Acid Using License (Only forTextileand Washing Plant) Group Insurance Certificate/Updated Evidence of Biometric System/ Group Insurance Premium Copy Bond License, Export Promotion Bureau (EPB) Certificate, TIN Certificate Export and Import Registration Certificate (ERC/IRC) BGMEA/ BKMEA/ LFMEAB Membership Certificate Fire Insurance Copy (If any)
Building Approval Plan Floor/ Machine Layout Approval Accord/Alliance Report or anyother assessment report related to building
Drinking Water, WasteWater, Stack Air Emission, Air Quality, Noise Level, Temperature and Humidity Level, etc. Environmenta l ImpactAssessment (EIA), Energy Survey/ Assessment (Water Consumption, Gas and Electricity Consumption etc.)
Child Labour and Child Labour Remediation Young Labour Recruitment Prohibition of ForcedLabour Harassment or Abuse,Compensation andBenefits Leave Maternity Benefit Working Hour Working Hour Approval Prohibition ofDiscrimination Disciplinary ActionProcedure Health and Safety Emergency PreparednessProcedures Freedom of Associationand Collective Bargaining Environment, WastageManagement Procedure Anti-Corruption or Anti-Bribery Policy
Audits/standards in the export-oriented RMG sector
Company Organogram and Job Responsibilitiesaccording to Organogram, Authorization Letter of BSCI MR Supply Chain Mapping, Stake Holder Mapping Contract Agreement with Service Provider (Security, Cleaning, Food, Transport, etc.) Sub-Contractor/ Sub supplier Policy andProcedure and MonitoringRecord Capacity Planning,Contingency Plan Company’s Mission and Vision, Long Term Goal Trade Union/ PC/ WWA/ WWC Formation Record, Meeting Minutes Grievance Procedure, Grievance Record, Survey Record on Grievance Procedure
Attendance Summary, Wage Sheet, Time Card, Pay Slip Fair Remuneration or Living Wage Template Resign or Terminate Workers List and Files Maternity Register and Files Annual Leave Encashment Record Festival Bonus Record Increment Record Provident Fund Record(If any) Production Record andPiece Rate Calculationfor Piece Rate Workers Leave Register
Risk Assessment and Internal Audit Report, Workers Health Checkup Record Safety Committee Record and Meeting Minutes Training Record: First Aid, PPE, H&S, ChemicalSafety, Fire Fighting (Internal and External), FireDrill (Internal and External) Firefighting Equipment List, Fire Team Allocation,First Aider List, Machine List, Chemical List, ToiletList Accident Register and Investigation Records,Hospital Agreement Maintenance Schedule and Record: Fire FightingEquipment, Electrical Equipment and Machineries, Compressor, Boiler and Generator Maintenance, House Keeping Record, Wastage Agreement and Disposal Record, PPE Issue Register Others Training: Orientation, BSCI CoC, Mid-Level Management, Local Law, Grievance Procedure, Disciplinary Action Procedure, Risk Assessment Awareness, Injury Analysis Awareness, Environmental Awareness, Anti-Corruption or Anti-Bribery Mapping and Training Personal File: Fire Safety Officer, Welfare Officer, Doctor, Nurse, Boiler Operator, Generator Operator, Electricians, Security Guard, W3o9rkers
Authorities Responsible for Licensing for Fire Safety
Fire safety in Bangladesh is definitely the most questionable element of industrial safety as majority of the industrial accidents are actually fire incidents
From June 2021 to March 2022 157 industrial accidents happened involving fire
Factories from all the sectors need to collect fire license and fire safety plan from Fire Service and Civil Defense (FSCD).Required Documents for Fire license from Fire Service and Civil Defense (FSCD)
Permit name
Requirements
Fire License with FSCD
1. Assessment form 2. Filled-in prescribed application form/online application 3. Land deed 4. Certification to the effect that there is no case 5. Trade license 6. No Objection Certificate (NOC) safety plan (7 floors and above) 7. Building design by an engineering firm 8. Memorandum of Association in case of limited companies 9. Deed of agreements10. Cover letter from BEPZA (in case of EPZ factories)
Source: Authors’ compilation from the FSCD website and other sources
The factories that are multi-storied buildings (above six stories) need to collect this permit from FSCD
Required Documents for Fire safety plan from FSCD
Permit name
Requirements
Fire Safety Plan for multistoried building with FSCD
1. Assessment form 2. Filled-in prescribed application form/online application form 3. Land Deed 4. Certification to the effect that there is no case 5. Trade license 6. No Objection Certificate (NOC) safety plan (7 floors and above) 7. Building design by an engineering firm 8. Memorandum of Association in case of limited companies 9. Deed of agreements 10. Covering letter from BEPZA (in case of EPZ factories) 11. Submission of the engineering drawing or design (the design has to be made and finalised by an engineering consulting firm 12. Filled in prescribed application form
Source: Authors’ compilation from the FSCD website and other sources
Authorities Responsible for Factory & Establishment License
• If anyone starts to set up a factory he/she needs to submit the documents to Department of Inspection for Factories & Establishments (DIFE) for the license
Required Documents for Factory license from DIFE
Required forms and challan
Required documents with form no. 76
Required documents with form no. 77
For approving the factory lay-out planfilled form no.76 Full filled form no.77 License fee throughtreasury challan
Trade license copy Rent agreements/ copy of landrejection Copy of NID ofowner/MD/CEO/director Soil test report Structural design/drawing prepared by a renowned engineer or engineering consulting firm Load bearing capacity certificate provided by a renowned engineer or engineering consulting firm Building construction certificate provided by a renowned engineer or engineering consulting firm Building design certificate approved by local authority (city corporation
Trade license copy Rent agreements/ copy of landrejection Copy of NID ofowner/MD/CEO/director Electricity demand note Memorandum of article Copy of approved factory layoutplan Local authority (CityCorporation) approved building design copy of the factory and letter of approval and layout plan Main copy of treasury challan List of employees/workers of thefactory Fire license copy
Required Documents for Drug License from DGDA
License name
Requirement
Drug License from Drug Administration’s General Directorate (DGDA)
Filled in Form 7 from Drug Administration’s General Directorate (DGDA) Bank statement of license fee payment Treasury challan with filled in form no. 7 Receiving the store deposit or photocopying the rentagreement. The ownership deed
Source: Authors’ compilation from DGDA website
Authorities Responsible for Standard certificate for food processing
Additional to all the previously mentioned licenses, certificate and registrations he/she will also have to collect Bangladesh Standards and Testing Institution (BSTI) registration is only applicable to the processed foods that are under the products list brought under Mandatory Certification Marks Wing
Required Documents for Bangladesh Standards and Testing Institution (BSTI) Certificate
Safety compliances
Requirements
Standard certificate from BSTI
Filled in BSTI Certificate Mark (CM)Trade LicensePermit from BOI/BSCICTrademark Registration/Copy of ApplicationLabel/Marking/Logo
Source: Authors’ compilation from the BSTI website
