This article addresses the absence of insolvent trading (IT)
provisions in the corporate law of Bangladesh, a significant gap contributing
to the continued rise of defaulted loans and wilful corporate defaulters. It
examines the key aspects of IT with reference to the current laws of Australia and
the UK as guidelines. Employing doctrinal and comparative legal research
methods, the study analyses selected IT laws using both primary and secondary
sources.
The findings highlight the urgent need for Bangladesh to
reform its outdated company law, drafted based on its 1913 colonial company
legislation. Proposed changes include modernising the definition of
“directors,” introducing IT regulation provisions, and clarifying critical
terms such as “debts” and “incurring debts.” The article also explores civil
and criminal breaches of directors’ duties to prevent IT from occurring,
detailing their liabilities, remedies, and defences. However, it excludes a
discussion of Australia’s recent “safe harbour” provisions, recommending a
separate investigation into that area.
The submitted recommendations aim to guide Bangladesh in
updating its company legislation to curb unfair financial practices and
strengthen economic integrity. Additionally, these reforms could serve as a
reference for other jurisdictions lacking robust IT provisions, encouraging
broader legal modernisation and fostering corporate accountability.