The private companies which are incorporated in Bangladesh under the Company Act, 1994 are mostly have the following structure: a) the shareholders are members of the same family; b) joint venture between local partners; c) joint venture between local and foreign partner; d) 100% foreign owned.
In case of family owned companies and 100% foreign owned companies, dispute amongst shareholders are relatively uncommon. However, this simplicity comes with risks, as in order to grow and to sustain in competitive market, local or foreign partners are often required.
Disputes tend to arise mostly in Joint Venture companies. The majorities who are in the control often are not transparent and tend to disregard the interest of minority shareholders. It is not very uncommon in Bangladesh that a minority shareholder often files a petition under Section-233 of the Company Act, 1994 for protection of their rights, or to seek assistance of court in selling their shares to the existing management or outsider at a fair value.
The common issues which are found in such applications are as follows:
(a) Majority has produced false accounts before minority and by showing fictitious expenditure consequently siphoned out substantial amount of money from the company's account for their personal gain; (b) Majority have produced two sets of account one for minority showing loss and another for other bodies showing profit; (c) Majority has not informed the minority about EGM, AGM, Board meeting and in extreme cases has passed resolution without notice or by means of fraud.
The Honorable Court, depending on the merit of the case, often directs majority to purchase the shares of the minority, at a fair value. Consequently the joint venture comes to an end. The above practice not only discouraging joint venture but also not allowing the company to grow and compete with the global brands. Hence Government, Professional, Businessman etc have a duty in greater interest of the country not to facilitate such practices.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
