Corporate feuds drown in backlog as courts struggle

Despite boasting 0.28 million registered companies and firms, the country faces a crippling shortage of dedicated courts to handle corporate disputes such as feuds over annual general meetings, share distributions or minority-shareholder rights.
Since there are no dedicated lower courts for corporate feuds, businesses resort to the two company benches within the High Court (HC) Division.
This leads to a massive backlog of 15,000 cases.
Against the backdrop of such scant resources, the pending cases eventually delay resolution by 5-6 years, causing hardship for companies, shareholders and the overall economy.
The Companies Act of 1994 mandates that registered companies file disputes with dedicated company courts. Businesses operating under trade licences or partnership deeds, however, should seek resolution through regular civil courts.
Therefore, the two HC benches now have to deal with corporate matters like feuds over annual general meetings, share distributions, company winding-up or minority- shareholder rights.
Shah Monjurul Hoque, senior Supreme Court lawyer and Company Act expert, said, "We need more company courts to settle the company matters efficiently."
"Specialised lawyers and judges with a deep understanding of the Company Act are crucial for establishing new benches. I request the chief justice to consider appointing a judge with proven expertise in this area," he added.
A deterrent to foreign investment
The scarcity of dedicated company courts acts as a deterrent to foreign direct investment (FDI), according to legal experts.
While the country's economic climate may not be the primary issue, smooth access to justice and prompt dispute resolution are crucial factors for foreign investors, they commented.
According to lawyers, foreigners scrutinise investment legal procedures. If they find the process convoluted and time-consuming, they often choose not to invest.
Legal experts pointed to the challenges faced by foreign investors seeking to exit the market.
"Imagine a foreigner who has made a joint venture or direct investment. If circumstances necessitate their departure, they need clear mechanisms for retrieving their capital and transferring their shares. Unfortunately, the current system offers no easy solutions," said a corporate lawyer.
Once a case is filed, they face years of litigation, leading to discouragement and withdrawal, he added.
Dual duties strain HC benches
Double duty adds to the burden on the two High Court benches tasked with resolving corporate disputes.
These benches are also responsible for hearing cases under various other acts, including the Succession Act, Divorce Act, Admiralty Courts Act, Merchant Shipping Ordinance, Trademark Act, Bank Companies Act, Arbitration Act and Insurance Act 2010.
While definitive statistics are unavailable, individuals familiar with the situation report a steady rise in pending company cases.
This trend aligns with data provided by Mohammad Saifur Rahman, registrar of the Appellate Division of the Supreme Court.
According to Mr Rahman's annual reports for 2021 and 2022, the total number of original jurisdiction cases, including those under the Companies Act, increased remarkably.
As of December 31, 2020, there were 12,710 original jurisdiction cases, including those under the Companies Act. In 2021, 2,114 new cases were filed, while only 374 were resolved, resulting in a net increase of 1,740.
This trend continued in 2022, with 3,040 new filings, 419 resolutions, and a net increase of 2,621. As of December 2022, the total number of pending original cases stands at 17,071.
The data paints a clear picture of the mounting strain on the benches, leading to delays in resolving company disputes.
HC for district-level company tribunals
Citing its limited enforceability in many cases, an HC bench previously called for a radical overhaul of the Companies Act of 1994.
Justice Md Ashraful Kamal, writing in a 2023 judgement, proposed sweeping changes to propel the country towards developed-nation status.
Among the key recommendations, the court advocated for the establishment of one or more Company Law Tribunals in each district, proportional to the number of registered companies.
Besides, it suggested the creation of a Company Appellate Tribunal in each division.
The court in the judgement said, "There is only one company court (during the judgment) for millions of private and public limited companies in a country with a population of about 170 million. Due to having only one company bench for numerous company disputes, the day-to-day operations are facing tremendous losses."

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