Shareholder Agreements in Bangladesh: Legal Framework and Key Clauses for 2026

Shareholder agreement Bangladesh law will enforce: the 2026 position

A shareholder agreement Bangladesh investors sign is a contract between owners, not a constitutional document of the company. That distinction decides almost everything. The Companies Act 1994 makes the articles of association binding on the company and every member, while the shareholders' agreement binds only those who signed it. A board seat, a veto or a right of first refusal that sits only in the agreement can be outvoted, ignored by the company or reduced to a damages claim at the moment it matters most.

This guide is for founders, local sponsors, foreign investors and their counsel negotiating or reviewing a shareholders' agreement for a Bangladeshi company in 2026. It explains how to make the agreement enforceable alongside the articles, how the key clauses work under Bangladeshi law, how Bangladesh Bank's March 2026 master circular shapes every clause that moves shares across the border, and what stamp duty and statutory minority protection add.

Summary: A shareholders' agreement in Bangladesh is enforceable as a contract under the Contract Act 1872, but only the memorandum and articles bind the company itself under section 22 of the Companies Act 1994. Every right that must work against the company, or against a future shareholder, should therefore be written into the articles as well. Clauses that move shares across the border must fit Bangladesh Bank's fair-value rules, and post-exit non-competes must survive section 27 of the Contract Act.

Key point: The articles can be altered by a three-quarters special resolution under sections 20 and 87 of the Companies Act 1994. A majority holder with that vote can, in principle, change the articles in a way the shareholders' agreement forbids. The protection is contractual: a voting undertaking, the company as a party, and reserved-matter consent over any change to the articles.

At a glance

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Table of Contents

How a shareholder agreement Bangladesh law recognises actually works

There is no dedicated statute on shareholders' agreements in Bangladesh. As a contract, the agreement is governed by the Contract Act 1872 and enforced through damages and, where available, specific performance and injunctions under the Specific Relief Act 1877.[3] [4] As a governance instrument, it depends on the Companies Act 1994 and the company's memorandum and articles, which set the rules the board, the registrar and the court actually apply.[1] It binds only its parties: a new investor or heir is bound only by signing a deed of adherence, and directors act under the articles and the law, not the private bargain of those who appointed them.

Our overview of company law in Bangladesh covers the corporate framework in general. This analysis concentrates on the agreement itself and how each clause should be drafted so that it holds up.

Section 22: the articles as a statutory contract

Section 22 of the Companies Act provides that, once registered, the memorandum and articles bind the company and its members as if each member had signed them.[1] That is the decisive difference. The articles are enforceable against the company and every future shareholder automatically. The agreement is enforceable only against the people who signed it.

Section 20: the majority's power to change the articles

Section 20 allows a company, by special resolution, to alter its articles in any manner, subject to the Act and the memorandum.[1] Under section 87, a special resolution needs a three-quarters majority of votes cast at a general meeting called on at least twenty-one days' notice, unless all members entitled to vote agree to shorter notice.[1] A 75 per cent holder can therefore change the articles alone, which is why minority protection must reach beyond the articles.

Making a shareholder agreement Bangladesh courts will enforce alongside the articles

The central drafting task is to align two documents that are enforced in different ways. Getting this wrong is the most common reason a carefully negotiated right turns out to be worthless.

When the two documents conflict

We are not aware of a reported Bangladeshi appellate decision that settles every aspect of a conflict between an agreement and the articles, and Bangladeshi courts treat Indian authority on the shared company law heritage as persuasive. In V.B. Rangaraj v V.B. Gopalakrishnan, decided on 28 November 1991, the Supreme Court of India held that a share transfer restriction agreed between shareholders but absent from the articles could not bind the company or defeat a transfer.[13] The practical lesson for Bangladesh is clear: the company acts on its articles, and a right that exists only in the agreement may leave the injured shareholder with damages rather than the outcome it bargained for.

Mirror the clauses that must bind the company

Every right that must operate against the company, the board or a future shareholder belongs in the articles: board nomination rights, quorum and casting vote, reserved matters, pre-emption, first refusal or first offer, tag-along and drag-along, deadlock triggers, compulsory transfers and preference share rights. Our guide to articles of association in Bangladesh explains how to draft and register them. Confidential commercial terms, such as valuation formulas and business plans, can stay in the agreement, provided the articles contain the hooks that make it operative.

Bind the vote, not the company's statutory powers

The agreement should contain an undertaking by every shareholder to vote to give effect to it and not to support any change to the articles without the consent required under the reserved matters. A shareholder's promise about how it will vote is a personal obligation and the safer route. A promise by the company that it will never alter its articles or increase its capital risks being unenforceable, because a company cannot fetter powers the statute gives it.

The agreement should also state that it prevails between the shareholders over the articles, oblige them to remove any inconsistency, make the company a party for limited purposes, and let the board refuse to register a transfer to anyone who has not signed a deed of adherence.

Board composition and nominee directors

Board composition is usually the first commercial term agreed and the first to cause trouble. Each significant shareholder should have a right to nominate a stated number of directors, stepping down as its holding falls below agreed thresholds.

Statutory minimums

Section 90 of the Companies Act requires every public company, and every private subsidiary of a public company, to have at least three directors, and every other private company at least two. Only a natural person may be a director.[1] A corporate investor must therefore nominate individuals, and the agreement should deal with alternates, removal and replacement and the related registrar filings.

Chair, quorum and casting vote

A casting vote in the hands of one side defeats an equal board, so allocate the chair and state whether the chair has one. Quorum should require at least one nominee of each major shareholder, with an adjourned-meeting fallback so that a party cannot paralyse the company by staying away. Virtual meetings, written resolutions and information rights such as monthly management accounts and a board observer should be dealt with expressly.

Nominee directors owe their duties to the company

A nominee director's duties are owed to the company, not to the shareholder that appointed them, and the agreement cannot lawfully require them to act against the company's interests. Place voting obligations on shareholders, not directors. Our analysis of corporate governance and directors' duties in Bangladesh sets out those duties.

Reserved matters in a shareholder agreement Bangladesh investors sign

Reserved matters are decisions that need the consent of a named shareholder, or a specified majority, whatever the voting position on the board or in general meeting. For a minority investor they are the most valuable term in any shareholder agreement Bangladesh negotiation, because they turn a minority stake into a veto over the decisions that change the value of the investment.

Shareholder and board reserved matters

A well-drafted list separates matters reserved to shareholders (changes to the memorandum or articles, new share issues, changes of capital, mergers, winding up, new lines of business, large related-party transactions) from operational matters reserved at board level (the annual budget, borrowing and security above limits, capital expenditure, key hires and litigation). Attach monetary thresholds, and test the list against the actual business so it neither paralyses management nor leaves material decisions uncovered.

How reserved matters interact with statutory majorities

Reserved matters sit on top of statutory requirements, not in place of them. A change to the articles still needs a special resolution under sections 20 and 87.[1] Conversely, a special resolution passed without the minority's consent is valid company law, and the remedy for breach of the reserved matters lies against the shareholders who voted for it. Mirror reserved matters in the articles, ideally as a quorum or consent requirement for the relevant resolution, and state the consequences of breach, such as reversal, an indemnity or a put option, so the injured party does not have to prove an unquantifiable loss of control.

New shares and pre-emption under section 155

Section 155 of the Companies Act requires that, when directors issue further shares within the authorised capital, the shares are first offered to existing members in proportion to their paid-up holdings, without discrimination between classes, by notice allowing at least fifteen days to accept. Once that period expires or a member declines in writing, the directors may dispose of the shares as they consider most beneficial for the company.[1]

Why the statutory right is not enough

Section 155(2) also allows the shares to be offered to persons who are not existing members, and the statutory right protects proportions, not price.[1] A shareholder that cannot fund its pro rata share at short notice can be diluted lawfully. Make any new issue a reserved matter, fix a longer acceptance period, give each shareholder the right to take up shares others decline, and set out how the issue price is determined. A foreign investor needs time to remit funds through the banking channel.

Anti-dilution and private company limits

Price-based anti-dilution protection through convertible preference shares must be written into the articles, because it changes what the shares are. A private company is also limited to fifty members, excluding employees, and cannot invite the public to subscribe.[1] Our guide to venture capital law in Bangladesh covers preference shares and convertibles.

Transfer restrictions: ROFR, ROFO, tag-along and drag-along

Under section 2(1) of the Companies Act, a private company is one whose articles restrict the right to transfer its shares, prohibit any public invitation to subscribe and limit membership to fifty.[1] Restriction is built into the vehicle; the question is its form. Most agreements start with a lock-in, permit transfers to wholly owned affiliates, and treat a change of control of a corporate shareholder as a transfer so the restriction cannot be avoided by selling the parent.

Right of first refusal and right of first offer

A right of first refusal requires a shareholder that has found a third-party buyer to offer the shares first to the other shareholders on the same terms. A right of first offer requires the seller to offer to the other shareholders before approaching the market, and then permits a third-party sale only at a price no lower than the one refused. Chambers' 2026 Bangladesh guide notes that private companies may impose a first-offer requirement on identical terms, by contract or in the articles, but public companies cannot.[10] A right of first refusal tends to deter third-party bidders; a right of first offer preserves a cleaner sale process.

Tag-along and drag-along

A tag-along right lets a minority sell alongside a majority seller on the same terms, so it is not left behind with a controlling shareholder it did not choose. A drag-along lets a majority that has agreed to sell the whole company compel the minority to sell on the same terms, which a buyer wanting 100 per cent will insist on. Because a drag-along forces a transfer of property, it belongs in the articles, with a minimum price or approval threshold and a power of attorney so the company can execute the transfer if a dragged shareholder refuses. Statutory squeeze-out after a takeover offer is a separate route, covered in our guide to the acquisition process in Bangladesh.

Why registration mechanics matter

Section 38 of the Companies Act prohibits registration of a transfer unless a duly stamped instrument executed by both parties is delivered with the share certificate, and requires the transferor to confirm the transfer before the registrar in person or, if abroad, through embassy-certified documents. A company that refuses registration must notify both parties within thirty days, and section 38(7) preserves its power to refuse registration in accordance with its articles.[1] That is the practical reason to mirror transfer restrictions in the articles: it gives the board a lawful basis to refuse a transfer made in breach. Our guide to share transfer in Bangladesh walks through the filings.

Deadlock and exit clauses

Our analysis of joint ventures in Bangladesh sets out the escalation ladder and buy-sell mechanisms commonly used to break deadlock. The points below concern what makes them enforceable in a Bangladeshi company. Define the trigger objectively, for example a reserved matter that fails at two consecutive properly convened meetings, and give each escalation step a fixed time limit.

Options and buy-sell clauses need a lawful price

Russian roulette and shoot-out clauses, put and call options and compulsory transfers on default all depend on a price. Once a non-resident is on either side, that price must fit Bangladesh Bank's fair-value framework, and an option exercised at a contractual price above the permitted limit may not produce a repatriable payment without Bangladesh Bank approval.[8] Provide for the price to be the higher or lower of the contractual price and the permitted fair value, as the deal requires, and for all parties to cooperate in any approval application.

Winding up as the last resort

Without a contractual solution, the fallback is the court. Section 241 of the Companies Act allows winding up where the court considers it just and equitable, and also where a private company's membership falls below two.[1] The second ground is a trap in two-party structures: a buy-out of one shareholder by the other should leave an affiliate or nominee holding at least one share.

Non-compete clauses and section 27 of the Contract Act

Section 27 of the Contract Act 1872 provides that every agreement by which anyone is restrained from exercising a lawful profession, trade or business of any kind is to that extent void.[3] Unlike English common law, it contains no general reasonableness test, so English-style post-exit non-competes cannot simply be copied into a shareholder agreement Bangladesh parties will rely on.

The goodwill exception

The only surviving statutory exception lets a person who sells the goodwill of a business agree with the buyer to refrain from carrying on a similar business within specified local limits, while the buyer carries on a like business there, if the limits appear reasonable to the court.[3] An exiting shareholder's covenant has the best chance where it is tied to the goodwill transferred, limited by area and linked to the buyer's continuing business.

During the relationship and after it ends

Indian courts applying the same wording distinguish restraints during a contract from those after it ends. In Superintendence Company of India v Krishan Murgai, decided by the Supreme Court of India on 9 May 1980, Sen J held that a covenant operating after the relationship ended was void under section 27, while a restriction during the term was not caught by the restraint of trade doctrine.[14] That authority is persuasive only, but it reflects the safer assumption: a non-compete lasting as long as the party remains a shareholder is far more defensible than one running for years after exit.

How to draft for enforceability

Tie restraints to the period of shareholding and the company's actual business. Prefer narrower covenants a court will enforce, such as non-solicitation and confidentiality, and back them with financial consequences that do not depend on an injunction, such as a compulsory transfer at a discount mirrored in the articles. Section 57 of the Specific Relief Act 1877 allows injunctions to enforce negative agreements, but not a covenant section 27 makes void.[4] Between competitors, section 15 of the Competition Act 2012 also prohibits agreements that limit markets or investment or divide markets by geography or customers where they harm competition.[7]

Foreign investors: Bangladesh Bank rules on share transfer pricing

For a foreign investor, the most important document after the shareholder agreement Bangladesh parties negotiate is Bangladesh Bank's FEID Circular No. 01 of 8 March 2026. It is a master circular on transfers of shares in unlisted companies involving non-residents and on repatriation of sale proceeds, and it replaces the earlier instructions in the Guidelines for Foreign Exchange Transactions 2018 and later circulars.[8] Our guide to foreign exchange regulations in Bangladesh covers the wider regime.

Entry and exit thresholds

A transfer from a resident to a non-resident, or between non-residents, needs no prior Bangladesh Bank approval if made at fair value; a valuation report is required where the deal value exceeds BDT 10 million.[8] When a non-resident sells to a resident, the authorised dealer bank may repatriate proceeds without approval only where the price does not exceed audited net asset value, where the deal does not exceed BDT 10 million and both parties sign a joint statement justifying the price, or where it does not exceed BDT 1 billion and matches an independent fair valuation. Every other case needs approval.[8]

Valuation

Fair value follows the circular's asset-based, market-multiple and discounted cash flow methods, used singly or weighted with justification, and must be prepared by a BSEC-licensed merchant banker or a chartered accountant listed with Bangladesh Bank or BSEC who is independent of the company.[8] Pricing formulas in the agreement should be capable of producing a figure the bank will accept.

What the circular means for the agreement

Several conditions should be written into the exit provisions. Buyer and seller must sign a dated memorandum of understanding, and the transfer must complete within 45 days of that memorandum or of Bangladesh Bank's approval, whichever is later. The price must be consistent with any share issue in the previous year. Escrow of proceeds requires Bangladesh Bank's prior permission. The non-resident must pay capital gains tax and stamp duty with funds brought from abroad, and the company must not bear them.[8] The circular is silent on options and deferred consideration, so build in valuation at exercise and a fallback if approval is refused. Our analysis of capital repatriation from Bangladesh walks through the bank file.

Stamp duty and tax

Section 35 of the Stamp Act 1899 provides that an instrument chargeable with duty is not admissible in evidence, and cannot be acted upon, unless duly stamped, although it can be admitted on payment of the duty and a penalty that may reach ten times the deficient duty.[9] An unstamped agreement can be cured, but at a cost and often at the worst moment, when urgent relief is needed.

A standalone shareholders' agreement is ordinarily stamped as an agreement at a modest fixed duty under Schedule I; confirm the current figure at signing, because Finance Acts amend the schedule. For a non-listed company, a share purchase agreement attracts 0.2 per cent and the share transfer instrument 1.5 per cent of the consideration.[10] Capital gains on share transfers are taxed at 15 per cent.[11] Allocate tax and duty expressly in every exit clause, and plan stamping, notarisation and embassy certification where a party signs abroad.

Minority protection beyond the contract: section 233

Section 233 of the Companies Act lets members apply to the court where the company's affairs are conducted, or directors' powers exercised, in a way that harms one or more members, where the company is likely to treat members unequally, or where a resolution unfairly affects any member.[2] Applicants must meet the section 195 threshold, which for a company with share capital means members holding at least one-tenth of the issued capital, and the court with jurisdiction is the High Court Division unless powers are delegated to a District Court.[1] An investor below ten per cent cannot use section 233, which makes contractual protection decisive for small holders.

The court may cancel or modify any resolution or transaction, regulate the company's future affairs or amend the memorandum or articles, after which the company cannot make inconsistent changes without leave.[2] Breach of a shareholder agreement Bangladesh courts are shown in such a petition is evidence of unfair prejudice, not a self-executing remedy. Our analysis of shareholder disputes in Bangladesh covers petitions and interim relief in depth.

Dispute resolution: arbitration and the courts

Section 28 of the Contract Act preserves agreements to refer disputes to arbitration from its bar on contracts that restrict legal proceedings.[3] The Arbitration Act 2001 applies in full to arbitrations seated in Bangladesh; for a foreign seat, only the provisions on recognition and enforcement of foreign awards apply.[5]

Stay and interim relief

Under section 10, a court must refer a matter covered by a valid arbitration agreement to arbitration and stay the suit, if asked before the applicant's first written statement, unless the agreement is void or inoperative or the dispute is incapable of settlement by arbitration. Section 7A lets the District Judge or, for international commercial arbitration, the High Court Division grant interim measures, including injunctions restraining transfers of property and appointment of a receiver.[5] For a shareholder trying to stop a transfer in breach of the agreement, that power is often the most valuable part of the clause.

The limits of arbitration in company disputes

A tribunal can award damages, declare rights between the parties and order a party to transfer its shares. It cannot wind up the company or make the orders section 233 gives to the court.[2] The Commercial Courts Ordinance 2026 listed shareholder agreements among commercial disputes while excluding matters within the High Court Division's original jurisdiction, and has been replaced by the Commercial Courts Act 2026 (Act No. 23 of 2026).[6] A contract claim and a company petition may therefore run in different forums. Draft the clause broadly, carve out urgent court relief, and choose the seat with relief against Bangladeshi assets in mind; see our guide to arbitration clauses in Bangladesh.

Clause map and the steps to a robust agreement

The table maps where each clause should sit and the Bangladesh-specific point that governs it; on a phone, scroll it sideways. The sequence that follows reflects how we take a shareholder agreement Bangladesh clients are negotiating from term sheet to a registered, enforceable structure.

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Review the agreement and the articles together at every funding round, because each new investor brings rights that must be mirrored, and keep a closing checklist covering stamping, RJSC filings and Bangladesh Bank reporting.

What to watch in 2026

A proposed Companies (Third Amendment) Act 2026, reported in August 2026, would require shareholders who are not beneficial owners of their shares to file a declaration, with a fine of up to Tk 50,000 for non-compliance, allow electronic registers and share transfers, and move approval for altering the memorandum from the courts to the registrar.[12] Nominee arrangements in any shareholder agreement Bangladesh investors hold should be reviewed against those rules once enacted. Exit clauses drafted before March 2026 should also be checked against FEID Circular No. 01 of 2026.[8]

If you are negotiating a new investment, adding a shareholder or reviewing an agreement that has never been mirrored in the articles, fix it before a dispute arises. Our corporate and commercial advisory practice and joint ventures and strategic alliances practice draft shareholders' agreements and articles together. Contact TRW to discuss your structure.

Frequently asked questions

Is a shareholders' agreement legally binding in Bangladesh?

Yes, as a contract between those who sign it. It does not bind the company or future shareholders as the articles do, because section 22 of the Companies Act gives that effect only to the memorandum and articles.[1] [3]

Does a shareholder agreement in Bangladesh need to be reflected in the articles?

Any right that must operate against the company, the board or a future shareholder should be, including board nomination, reserved matters, transfer restrictions, pre-emption, tag-along, drag-along and deadlock. Confidential commercial terms can stay in the agreement.

Can the majority change the articles to override the agreement?

A three-quarters special resolution can alter the articles under sections 20 and 87.[1] The protection is a contractual undertaking by every shareholder not to vote for changes without the agreed consent.

Do existing shareholders have a statutory pre-emption right on new shares?

Yes. Section 155 requires further shares to be offered to existing members pro rata, by notice allowing at least fifteen days to accept.[1]

Are rights of first refusal allowed in Bangladeshi companies?

In private companies, yes, by contract or in the articles. Public companies cannot require a seller to offer its shares first to existing shareholders.[10]

Is a non-compete clause in a shareholders' agreement enforceable?

A restraint lasting while the party remains a shareholder is more defensible. A post-exit restraint risks being void under section 27 of the Contract Act unless it fits the goodwill exception.[3]

At what price can a foreign shareholder sell on exit?

Proceeds can be repatriated without approval if the price is within audited net asset value, up to BDT 10 million with a joint statement, or up to BDT 1 billion with an independent fair valuation. Other cases need Bangladesh Bank approval.[8]

What stamp duty applies to shareholder documents?

A standalone agreement is ordinarily stamped at a fixed duty; a share purchase agreement attracts 0.2 per cent and a share transfer instrument 1.5 per cent of the consideration for non-listed companies.[10] Unstamped instruments are inadmissible until duty and penalty are paid.[9]

Can a minority shareholder go to court if the agreement is breached?

Yes, for breach of contract, and members holding at least one-tenth of the issued capital can also petition the High Court Division under section 233.[1] [2]

Should a shareholders' agreement include an arbitration clause?

Usually, with a clear seat, rules and language and a carve-out for urgent court relief. Courts stay suits covered by a valid arbitration agreement and can grant interim measures under section 7A, but statutory company remedies stay with the court.[5]