TRW & Co · Company law
Directors' Duties and Liabilities in Bangladesh
The directors duties Bangladesh law imposes come from the Companies Act 1994, the articles and general fiduciary principles. Directors must act within their powers, in good faith, with care and without conflicts. Specific rules govern loans, disclosure of interests and supply contracts, and tax, cheque and insolvency laws can make directors personally liable. Here is what boards in Chattogram need to know.
Key pointThe Companies Act ban on interested directors voting does not apply to most private companies, so in family and owner-managed companies conflicts are controlled by disclosure, the articles and fiduciary duty, which makes careful minuting essential.
At a glance
Three sources of duty
Duties come from the Companies Act 1994, the memorandum and articles of association, and common-law fiduciary and care duties applied by the courts.
Minimum board size
A private company needs at least two directors; a public company, or a private subsidiary of a public company, needs at least three under section 90.
Indemnities are limited
Section 102 voids clauses exempting or indemnifying directors for negligence or breach of duty, except defence costs where the director succeeds or obtains relief.
Conflicts must be declared
Section 130 requires disclosure of any direct or indirect interest in a company contract at the board, and the company must keep a register of such contracts.
Personal tax exposure
Directors of a private company can be liable for its unrecoverable tax after winding up or three years of discontinued business, unless they disprove neglect.
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The short answer
The directors duties Bangladesh law imposes come from three places: the Companies Act 1994, the company’s own articles of association, and the general common-law and equitable duties that courts apply to anyone who manages someone else’s property. In practice, a director must act within the company’s powers, in good faith for the company, with reasonable care and skill, and must not let personal interests conflict with the company’s.
The Companies Act adds specific rules on top: limits on loans to directors, disclosure of interests in contracts, board consent for supply contracts with directors, restrictions on selling the undertaking, and a ban on clauses that exempt directors from liability for negligence or breach of trust. Separate laws on tax, VAT, cheques and labour can make directors personally liable for what the company does.
This guide explains each source, the personal liability risks, how to manage conflicts properly and what changes for listed companies, banks and foreign-owned groups in Chattogram (Chittagong). For day-to-day board support, see our corporate lawyers in Chattogram and company secretarial team.
Where directors duties Bangladesh law imposes come from
The Companies Act 1994
The Companies Act 1994 does not contain a single codified list of duties in the way some newer laws do. Instead it sets specific rules on appointment, disqualification, conflicts, loans, accounts and liability, and leaves the general duties to the common law. Section 90 requires at least two directors for a private company and at least three for a public company or a private company that is a subsidiary of a public company. Section 94 lists grounds of disqualification, such as being an undischarged insolvent or a minor, and allows the articles to add more.
The Act also makes the directors responsible for the company’s books of account, annual balance sheet and filings with the Registrar of Joint Stock Companies and Firms (RJSC). Failures in these areas expose “officers in default” to fines, and repeated failures are often the first thing a regulator or creditor notices.
The articles of association
The articles set out the board’s powers, quorum, how directors are appointed and removed, and often extra disqualification grounds. Directors who act outside the powers given by the memorandum and articles risk personal liability for the consequences. In joint ventures and investor-backed companies, the articles and any shareholders agreement also set reserved matters that the board cannot decide alone.
General fiduciary and care duties
Bangladeshi courts, like those in other common-law systems, treat directors as fiduciaries. That means acting honestly in the interests of the company as a whole, using powers for their proper purpose, not making secret profits from the position, keeping company information confidential and exercising the care and skill reasonably expected of someone in the role. A director who is also a major shareholder still owes these duties to the company, not to himself or his family.
Listed companies, banks and other regulated businesses
Directors of listed companies are also bound by the corporate governance requirements of the Bangladesh Securities and Exchange Commission. The Commission approved a Corporate Governance Code in 2018 that, among other things, requires a nomination and remuneration committee and certification of financial statements by the chief executive and chief financial officer, as reported at the time. Bank directors face additional rules from Bangladesh Bank, and insurers, financial institutions and other regulated firms have their own regimes.
The statutory rules every director should know
Much of what the directors duties Bangladesh boards follow day to day is found in specific Companies Act rules. The table below summarises key Companies Act provisions. Section numbers follow the 1994 Act; check the current text, as the Act has been amended since.
| Section | Rule | Practical effect |
|---|---|---|
| 90 | Minimum number of directors | At least two for a private company; three for a public company or a private subsidiary of a public company |
| 94 | Disqualification | Unsound mind, undischarged insolvency, pending insolvency application, unpaid calls or minority; articles may add grounds |
| 102 | Exemption and indemnity clauses void | The company cannot exempt or indemnify a director for negligence, default, breach of duty or breach of trust, except costs of a successful defence |
| 103 | Loans to directors | Loans, guarantees or security for directors and their connected firms and companies are prohibited, subject to narrow exceptions requiring board and general meeting approval |
| 104 and 105 | Office of profit and supply contracts | General meeting consent for an office of profit; board consent before a director or connected business contracts to sell, buy or supply goods with the company |
| 106 and 107 | Removal and restrictions on powers | Shareholder directors can be removed by extraordinary resolution; selling the undertaking or forgiving a director’s debt needs general meeting consent |
| 130 and 131 | Disclosure of interest and voting | Interested directors must disclose at the board; the voting ban does not apply to a private company unless it is a subsidiary of a public company |
| 396 | Relief by the court | A director who acted honestly and reasonably may be wholly or partly excused from liability |
Two points are often missed. First, under section 108 a director’s office becomes vacant if, among other things, he or she accepts a loan in breach of section 103 or contracts in breach of section 105, or misses three consecutive board meetings (or all meetings for three months, whichever is longer) without leave. Second, the voting ban in section 131 does not apply to most private companies, so conflicts there are controlled mainly by disclosure, the articles and the general fiduciary duty.
Conflicts, related parties and group companies
Most disputes about directors duties Bangladesh courts hear involve conflicts of interest. In family groups in Chattogram, the same people often sit on the boards of a manufacturer, a trading company, a transport business and a property company. Goods, cash and guarantees move between them. Each transaction can be lawful, but only if the right approvals are obtained and the terms are fair to each company.
Section 130 requires every director who is directly or indirectly interested in a contract or arrangement to disclose the nature of the interest at the board meeting where it is decided, or at the first meeting after the interest arises. A general notice that the director is a member or director of a named company or firm is sufficient for later dealings with it. The company must keep a register of these contracts open to members.
For groups, the safest course is a written related-party policy: a list of connected entities, a rule that all related-party contracts go to the board with disclosure minuted, an arm’s length pricing check and, for larger transactions, shareholder approval. The same records help with transfer pricing reviews by the tax authorities and with lenders’ covenants.
When directors become personally liable
Limited liability protects shareholders, not necessarily directors. A breach of the directors duties Bangladesh law sets can cost a director personally, and several laws reach past the company to the people running it.
- Tax: section 257 of the Income Tax Act 2023 makes every person who was a director of a private company during the relevant year liable for tax that cannot be recovered after the company is wound up or has stopped business for three successive years, unless he or she shows the non-recovery was not due to gross neglect, misfeasance or breach of duty.
- Cheques: the Negotiable Instruments Act 1881 extends liability for dishonoured company cheques to persons in charge of and responsible for the company’s business, subject to statutory defences. See our guide to cheque dishonour defence.
- Winding up: under section 331 of the Companies Act, the court in a winding up can order a past or present director guilty of misfeasance or breach of trust to repay or restore money or property, or to contribute compensation. Falsifying books in a company being wound up is a criminal offence under section 332.
- Minority claims: members holding the required share of capital can apply to the High Court Division under section 233 where the company’s affairs or the directors’ powers are conducted in a manner prejudicial to them.
- Regulatory laws: labour, environmental, VAT, customs and anti-money laundering laws can also expose directors and officers to fines or prosecution where the company commits an offence with their consent or neglect.
How to discharge directors duties in practice
Good process is the best defence against a claim that the directors duties Bangladesh courts recognise have been breached. Courts look at what directors knew, what they asked and how they decided. A simple routine protects most boards.
- Know the constitution. Read the memorandum, articles, any shareholders agreement and delegated authority limits. Check which decisions belong to the board and which to shareholders.
- Declare interests early. Give general notices of interest for every connected company and firm, update them when holdings change, and declare specific interests before each relevant item.
- Get the information. Ask for board papers in advance, with financials, legal advice and options. Record questions asked and answers given.
- Decide for the company. Weigh the company’s interests, including creditors’ interests where it is in financial difficulty. Do not simply follow a dominant shareholder or a parent company’s instruction without considering the subsidiary.
- Minute properly. Minutes should show the information considered, conflicts declared, who voted and the reasons for the decision.
- Keep filings current. Make sure annual returns, Form XII changes in directors and charge registrations are filed with RJSC on time.
- Take advice on red flags. Seek legal advice when the company may be insolvent, when a large related-party deal is proposed or when a regulator starts an investigation.
An illustrative scenario
This example is illustrative only and does not describe a real client or case.
A Chattogram steel trading company has three directors from one family. One director also owns a transport company that hauls the trading company’s goods from the port. Over several years the transport company is paid well above market rates, and the arrangement is never discussed at a board meeting. A cousin who holds a significant minority stake starts asking questions after dividends fall.
The director has not disclosed the interest under section 130, and the contract may also fall within the general duty not to profit from the position. The minority holder, if he meets the threshold, could apply to the High Court Division for relief, and the company could pursue the director for the excess payments. A board that had minuted a general notice of interest, benchmarked the haulage rates and approved the contract with the interested director stepping aside would be in a very different position. The example shows that the directors duties Bangladesh law imposes turn on process as much as on the commercial outcome.
At the first board meeting of each year, ask every director to sign a general notice of interest listing every company and firm in which he or she is a director, partner or member, and minute it. Update it whenever holdings change. Under section 130 a general notice covers later dealings with those entities, so this one step removes the most common breach in family-run groups.
Common mistakes and risks
Nominee directors who only follow instructions
Directors nominated by an investor, a joint venture partner or a parent company often see themselves as representatives. Legally, each director owes duties to the company on whose board he or she sits. A nominee may consider the appointing shareholder’s wishes, but must still decide in the company’s interests and must keep its confidential information confidential unless the articles or a shareholders agreement permit sharing. Joint venture agreements should say clearly what nominees can report back.
Assuming an indemnity in the articles will protect you
Section 102 makes void any provision in the articles or a contract that exempts a director from, or indemnifies him or her against, liability for negligence, default, breach of duty or breach of trust. The company may only indemnify the costs of defending proceedings in which the director wins, is acquitted or obtains relief from the court. Directors who want protection should look at directors’ and officers’ insurance and at their own conduct, not at a clause in the articles.
Signing cheques and documents without control
In Chattogram trading businesses, directors routinely sign post-dated cheques as security for suppliers and lenders. If the cheques bounce, criminal complaints often name every director. Directors should know which cheques have been issued, keep a register, and avoid signing blank or post-dated cheques without board approval. A director who has genuinely ceased to be involved should resign properly and ensure the change is filed with RJSC.
Resigning without updating the records
A resignation that is not accepted, minuted and filed with RJSC in Form XII leaves the public record showing the person as a director. Banks, tax authorities and complainants rely on that record. Former directors have been drawn into disputes years after they left because the filing was never made. Keep a copy of the resignation letter, the board minute and the RJSC filing.
Ignoring creditors when the company is struggling
When a company is insolvent or close to it, directors who continue trading, pay favoured creditors or move assets to connected companies take serious risks. In a winding up, the liquidator can examine past conduct and seek orders for misfeasance. Take advice early, keep proper records and consider restructuring options before the position becomes irretrievable.
Foreign directors and foreign-owned subsidiaries
Foreign nationals can serve as directors of Bangladeshi companies, but they need to think about work permits if they will work in Bangladesh, tax residence and how they will sign documents and attend meetings. Subsidiaries of multinational groups often run board meetings by video and execute documents abroad; make sure the articles permit this and that documents signed overseas are properly stamped and authenticated when used in Bangladesh.
Group policies drafted for another jurisdiction do not replace the directors duties Bangladesh law imposes on local boards. Loan and guarantee arrangements between a subsidiary and its directors, cash pooling and intra-group services all need checking against section 103, Bangladesh Bank foreign exchange rules and the tax rules on related-party transactions. The Invest Bangladesh Authority, which has succeeded BIDA under the Invest Bangladesh Act 2026, handles investment registration and work permit approvals for foreign-owned companies outside the economic zones. Our foreign investment lawyers coordinate with the firm’s offices in Dhaka, Singapore, Dubai and London.
Checklist for directors and boards
Use this list to review how well your board meets the directors duties Bangladesh law expects:
- Every director has read the memorandum, articles and any shareholders agreement.
- General notices of interest are on file and updated; the register of contracts under section 130 is kept.
- Related-party transactions go to the board with disclosure, pricing evidence and minutes.
- No loans, guarantees or security for directors or connected businesses without checking section 103.
- Books of account, audited accounts, annual returns and Form XII filings are current with RJSC.
- Cheque signing authority is controlled and recorded.
- Directors’ and officers’ insurance has been considered, knowing that article indemnities are limited.
- There is a plan for advice if the company becomes insolvent or a regulator investigates.
Disputes between directors and shareholders are handled by our shareholder disputes lawyers, and the firm’s Bangladesh advocates appear in the High Court Division and the courts in Chattogram. For related reading, see our guides on shareholders agreements and shareholder oppression remedies. To speak to our Chattogram office, contact TRW & Co at Room 4022, Annex 2, District and Sessions Judge Court Building, Court Hill (Porir Pahar), Kotwali, Chattogram 4000, info@trw.co or +880 1779 127165, or visit our law firm in Chittagong page.
Frequently asked questions
01What are the main duties of a company director in Bangladesh?
A director must act within the powers given by the memorandum and articles, act honestly in the interests of the company as a whole, use powers for their proper purpose, exercise reasonable care, skill and diligence, avoid conflicts of interest, not make secret profits and keep company information confidential. The Companies Act 1994 adds specific rules on loans to directors, disclosure of interests, supply contracts with directors, accounts and filings. Listed companies and banks face additional governance requirements from their regulators.
02Can a director be personally liable for company debts?
Not usually for ordinary trade debts, because the company is a separate legal person. But several laws reach directors personally. A director may be liable for a private company’s unrecoverable tax after winding up, for dishonoured company cheques as a person in charge of the business, for misfeasance or breach of trust in a winding up, and for regulatory offences committed with his or her consent or neglect. Personal guarantees given to banks also create direct liability.
03Can a company indemnify its directors?
Only to a limited extent. Section 102 of the Companies Act makes void any provision, in the articles or a contract, that exempts a director from or indemnifies him or her against liability for negligence, default, breach of duty or breach of trust. The company may indemnify the costs of defending civil or criminal proceedings in which the director succeeds, is acquitted or is granted relief by the court. Directors’ and officers’ insurance is the usual way to fill the gap.
04Can a company lend money to its directors?
Section 103 of the Companies Act generally prohibits a company from making loans, giving guarantees or providing security for its directors, for firms in which they are partners and for private companies in which they are directors or members. There are narrow exceptions, including for banking companies and certain private companies, but they require board sanction, general meeting approval and disclosure in the balance sheet. Breach can lead to fines, joint liability for repayment and vacation of the director’s office.
05How is a director removed in Bangladesh?
Section 106 of the Companies Act allows the company to remove a shareholder director before the end of his or her term by extraordinary resolution, and to appoint a replacement by ordinary resolution. A removed director cannot be reappointed by the board. The articles may contain further rules, and a shareholders agreement may give particular investors the right to appoint and remove their nominees. The change must be filed with RJSC in Form XII so the public record is accurate.
06Do nominee directors owe duties to the shareholder who appointed them?
Their legal duties are owed to the company on whose board they sit, not to the appointing shareholder. A nominee may take the appointer’s views into account, but must decide in the company’s interests and must not pass on confidential information unless the articles or a shareholders agreement allow it. Joint venture and investment agreements should set out clearly what information nominees can share and how conflicts are handled.
Sources and official materials
- Companies Act 1994 (Act No. 18 of 1994) — Directors, disqualification, loans, interests, indemnities, winding up and relief (ss.90 to 131, 233, 331 and 396)
- Income Tax Act 2023 (authentic English text, NBR) — Section 257: liability of directors for unrecoverable tax of private companies
- Negotiable Instruments Act 1881 — Dishonour of cheques and offences by companies
- Bangladesh Securities and Exchange Commission — Corporate Governance Code and rules for listed companies
- The Financial Express: BSEC approves new rules (June 2018) — Approval of the Corporate Governance Code and takeover rules
- Registrar of Joint Stock Companies and Firms — Filing of director changes, annual returns and charges
General information only, current as at 2 November 2026. It is not legal advice and does not create an advocate–client relationship. It reflects the law of Bangladesh unless stated otherwise, and the law, court practice and official fees change frequently. Check current official sources and take advice on the facts of your matter.
