Businesses push for dormant company cleanup, auditor safeguards in Companies Act draft
Businesses Push for Dormant Company Cleanup in Bangladesh
Bdbusinessdaily.com – Businesses push for dormant company cleanup and stronger auditor protections as Bangladesh's corporate-law reform enters a critical consultation phase. On 7 September, a high-level session at the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) headquarters in Motijheel, Dhaka, brought together industry associations, regulators, stock-exchange officials, and audit-firm representatives to examine the draft third amendment (2026) to the Companies Act, 1994. FBCCI Administrator Md Fazlul Haque chaired the meeting, which centred on reforms intended to streamline corporate administration while reinforcing governance guardrails long contested in the country's capital markets.
The Scale of Inactive Registrations
The most urgent issue on the agenda concerned the sheer volume of registered entities that no longer conduct commercial activity. Md Yasin Miah, a member of the Institute of Chartered Accounts of Bangladesh (ICAB), highlighted a stark statistical gap: roughly 3,00,000 companies remain on the registrar's rolls, yet only between 57,000 and 58,000 have undergone an audit since the Digital Business Identification system went live in 2020. In practical terms, the overwhelming majority of registered entities are inert, cluttering the corporate registry and complicating oversight without contributing to economic output.
Miah urged the drafting committee to adopt a streamlined mechanism for identifying such inactive entities and formally deregistering them, thereby easing administrative burden on both firms and regulators. The proposal mirrors a broader global trend in which jurisdictions periodically purge their company registers to preserve data integrity and limit shell-company abuse. Businesses push for dormant company deregistration precisely because the current framework offers no efficient off-ramp for entities that have ceased operations years ago.
Auditor-Change Safeguards Under Scrutiny
A separate provision in the draft, which would relax procedural hurdles for replacing a company's external auditor, drew pointed criticism. Miah warned that loosening these requirements could open a channel through which intermediaries—brokers, consultants, or other third parties—might pressure firms into switching audit firms, potentially eroding the independence and quality of financial reporting. He argued that existing safeguards, though sometimes cumbersome, serve a legitimate protective function and should be retained in substance even if their administrative language is modernised.
AGM Notice Period and Governance Thresholds
The length of advance notice required before an annual general meeting became a point of active debate. Speaking on behalf of FBCCI, Barrister Nihad Kabir advocated a minimum of 21 days' notice to shareholders, reasoning that adequate lead time allows dispersed investors—particularly retail holders—to plan attendance or exercise voting rights. A businessman in the audience countered that 14 days would suffice and would reduce compliance friction for smaller firms. Mohammad Hatem, president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), voiced support for the shorter window, reflecting the preference of export-oriented manufacturers that often operate on compressed annual cycles.
Kabir further proposed that companies generating annual revenue above Tk 500 crore should be required to appoint a dedicated company secretary, a role that in mature markets serves as a compliance anchor between the board and statutory obligations. He also recommended granting unlisted public limited companies greater latitude in selecting independent directors, recognising that the talent pool for such positions outside the listed segment remains thin in Bangladesh.
The "Group" Definition Dispute and Missing BSEC Proposals
A recurring source of friction between listed companies and Bangladesh Bank was flagged by multiple delegates: the absence of a single, harmonised definition of a "company group" across the Companies Act and banking-sector regulations. Ambiguity in this term has generated repeated disputes over consolidated reporting obligations, inter-company lending limits, and capital-adequacy calculations. Business representatives called for a unified statutory definition that would eliminate interpretive divergence between the two regulatory regimes.
Abul Kalam, Executive Director of the Bangladesh Securities and Exchange Commission (BSEC), noted that several measures the commission tabled in December 2025 had not been carried into the current draft. Among the absent items was a provision permitting listed companies to repurchase their own shares under defined conditions—a mechanism that Section 58 of the existing statute presently prohibits outright. Kalam also highlighted BSEC's proposals to moderate certain reporting thresholds for smaller listed issuers, arguing that their omission would leave a regulatory gap the commission had already identified.
The consultation made clear that businesses push for dormant company deregistration not as a formality but as a prerequisite for credible regulatory oversight. Without a functional exit mechanism, the registry accumulates noise that obscures genuine compliance risk.
Frequently Asked Questions
What is the draft third amendment to the Companies Act, 1994? It is a proposed revision, expected to be tabled in 2026, that would update corporate-administration procedures, auditor-appointment rules, AGM notice requirements, and governance thresholds for both listed and unlisted companies in Bangladesh.
Why do businesses want dormant companies removed from the registry? With roughly three lakh registered entities but fewer than sixty thousand audited since 2020, the majority of registrations are inactive. Removing them reduces administrative burden, improves data integrity, and narrows the window for shell-company abuse.
What is the AGM notice-period debate about? FBCCI advocates 21 days' advance notice to protect retail shareholders' ability to attend or vote. Export-sector representatives, including BKMEA, prefer 14 days to reduce compliance friction for firms operating on compressed annual cycles.
What role does BSEC play in this reform? BSEC submitted proposals in December 2025—including a conditional share-repurchase mechanism and moderated reporting thresholds for smaller issuers. Several of these items were not incorporated into the current draft, prompting calls for their inclusion in subsequent rounds of consultation.