Forcing a Shareholder to Sell His Shares in Bangladesh: A Shareholder Being Forced to Sell His Shares

Unless there is a contractual duty giving them the right to do so, a shareholder cannot usually compel another shareholder to sell their shares. For instance, if the company’s articles of association, shareholder agreement, or another legal contract contain a clause allowing for such a transfer.
Negotiating with the shareholder whose shares you wish to purchase is typically the best course of action for buying shares. Shares can be sold through a share transfer agreement, in which case the shareholders acquire the shares of the other shareholders, or through a business buy-back, in which case the shares are returned to the company.

This article provides answers to common questions posed by both majority and minority shareholders when disputes arise. It is a general guide to help you understand what factors must be considered to answer questions like:

• Can a majority shareholder remove a minority shareholder?
• Can a majority shareholder sell the company?
• Can a minority shareholder block a sale?
• Can a majority shareholder be removed?

Shares may be transferred or sold at the individual’s discretion:

First, either the transferer or the transferee must submit an application.
Second, it must be fully signed, stamped, and presented to the transferee with the firm by the transferer.
Thirdly, within a month of obtaining the transfer documentation for the shares, the corporation will send notices of refusal to both parties.
However, since they own a majority of the stock, the pro-sale shareholders may wish to adopt a special resolution at the annual general meeting amending the company’s articles of association to add clauses requiring the sale of the shares. This sale will be regarded as a sale at fair value, and frequently the Articles of Association contain a calculation that specifies how the valuation should be determined.

Shareholders’ agreements are yet another means of accomplishing this. Although this kind of agreement is uncommon in publicly traded organizations, it is crucial and a must in privately owned businesses. That’s because minority shareholders, particularly those who want to sell or transfer their shares to outside buyers, can generate serious issues for small businesses.

A Shareholder Being Forced to Sell His Shares:

A shareholders’ agreement might stipulate specific conditions under which one person must sell shares to fellow shareholders or back to the corporation, primarily as a safeguard against potentially chaotic situations. For instance, some corporations grant the company the first option to repurchase shares that descend to an heir after a shareholder’s passing. Other agreements may compel a sale under different terms. The remuneration that the selling shareholders will receive for their shares is frequently specified in the agreement. In some instances, the money the selling shareholders would receive won’t necessarily reflect the shares’ fair market value at the time of sale, but rather, it will reflect a formula that all shareholders will have agreed upon when they first signed the agreement.

Unless there is a contractual duty giving them the right to do so, a shareholder cannot usually compel another shareholder to sell their shares. For instance, if the company’s articles of association, shareholder agreement, or another legal contract contain a clause allowing for such a transfer.

Negotiating with the shareholder:

Negotiating with the shareholder whose shares you wish to purchase is typically the best course of action for buying shares. Shares can be sold through a share transfer agreement, in which case the shareholders acquire the shares of the other shareholders, or through a business buy-back, in which case the shares are returned to the company.

A special resolution to amend the company’s Articles of Association to add clauses requiring a sale of the shares could be passed if the shareholders who want the sale to proceed hold a majority shareholding (i.e., 75% of the shares). This sale would typically be at fair market value, and frequently the Articles of Association contain a formula that specifies how the price should be determined.

A minority shareholder, however, is entitled to apply to the court and allege “unfair prejudice.” The other shareholders are typically personally sued in response to an unfair prejudice petition filed by a minority shareholder, and they will typically have to pay for their own legal defense.

When a court determines that changes to the articles of association were made in good faith and in the best interests of the business, it follows that the court did not find that the changes were unreasonably adverse to a minority shareholder. However, it is likely that the minority shareholder will be able to oppose the modification if the motivation behind modifying the Articles is unlawful and not in the best interests of the firm. If the change is done in good faith and is in the best interests of the business, it may be acceptable even if it has a negative impact on or is intended to have a negative impact on a minority shareholder.

Advantage of the modification:

The advantage of the modification for the corporation will rely on whether a reasonable person would view it as being in the company’s best interests. According to current case law, judges did not find it to be unreasonably detrimental to modify the Articles of Association to allow majority shareholders to acquire minority shares. It’s crucial to remember that these landmark instances did not introduce the rights for the first time. The majority shareholders’ goal was to clean up the Articles of Association in order to promote consistency and clarity. It is somewhat more likely that a minority shareholder would prevail in a lawsuit for unfair prejudicial behavior if such rights were being introduced for the first time.

We emphasize that the preferred course of action is nearly always to negotiate with the opposing party and avoid any such allegations being made in order to avoid litigation, particularly litigation that is launched against shareholders personally. If shareholders decide to alter the Articles of Association, they should carefully evaluate their decision and make sure it is noted in the minutes adopting the special resolution.

However, these arrangements may also be detrimental to the interests of the smaller shareholders. Thus, if minority shareholders are forcibly forced to sell their shares or deal with the hidden harm that will be done to their interests, the legislation provides a remedy. A minority shareholder can therefore appeal to the court and claim “unfair prejudice” as a result. The other shareholders are typically personally sued in response to an unfair prejudice petition filed by a minority shareholder, and they will typically have to pay for their own legal defense.

Court’s take on changes to the articles of association:

However, a court concluded that the changes to the articles of association were done in good faith and in the best interests of the business; as a result, the court did not find that the changes were unreasonably adverse to a minority shareholder. However, it is likely that the minority shareholder will be able to oppose the modification if the motivation behind modifying the Articles is unlawful and not in the best interests of the firm. If the change is done in good faith and is in the best interests of the business, it may be acceptable even if it has a negative impact on or is intended to have a negative impact on a minority shareholder.

The laws are put in place to protect the rights of both parties, but they differ according on the circumstance in order to protect the interests of those who will be most impacted. The Bangladesh Companies Act of 1994, the Bangladesh Securities and Exchange Ordinance of 1969 (along with the Bangladesh Securities and Exchange Commission Act of 1993 and the rules made thereunder), the rules of the Dhaka Stock Exchange (DSE) and the Chittagong Stock Exchange (CSE), as well as the Company’s Articles of Association, serve as the primary regulatory framework for business matters in Bangladesh.

Are you planning to register a private limited company in Bangladesh?

Company formation and registration at Tahmidur Rahman TRW:

The legal team of Tahmidur Rahman, The Law Firm in Bangladesh TRW are highly experienced in providing all kinds of services related to forming and registering a Private Limited Company, Branch office Registration, Share Transfer Process in Bangladesh . For queries or legal assistance, please reach us at:

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