The firms were already in coma, Covid just quickened their death

Infographic: TBS

Like hundreds of human victims, several hundred small and ailing companies also died from the coronavirus fallouts in the last couple of years. They include companies like footwear accessory-maker Innerbd Products Ltd and garment exporter Middly Fashion Ltd, both suffering from lack of competent leadership.

The wave of liquidation seems to continue as the Registrar of Joint Stock Companies and Firms is now processing 208 more liquidation requests.

The companies have wound up owing to ownership crises, internal disputes and mounting bank loans compounded by Covid, according to data from the Registrar of Joint Stock Companies and Firms.

For example, take the case of Innerbd Products Ltd, which was established in 1998 and touched the Tk200 crore mark of annual turnover in 2014. The production line included footwear-making accessories and one-time paper cups.

Amjad Hosen, the founder-managing director of Innerbd, died in 2015. Then his wife, sons and daughter took over the firm. Under the new leadership, the company did not fare well. Then came the Covid pandemic, forcing the new owners to shutter the business in mid-2020 owing to labour and financial crises.

"We had been trying to keep the business afloat. But it's true that we did not actually understand it," Ashikur Rahman Shuvo, Amjad Hosen's elder son who took charge as managing director of the company, told The Business Standard.

Shuvo said there were 300 workers at the company's Gazipur, Tongi and Narayanganj factories. The pandemic eroded sales and at the same time movement restrictions intensified the labour crisis.

"At one point, we decided to apply for liquidation," he said. Following the completion of some official procedures, the company was wound up in February 2021. The factories, lands and raw materials in the inventory were sold at Tk240 crore, bank loans were cleared, workers were bid goodbye and the remaining amount was distributed among the family.

Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh (PRI), said many small or ailing businesses could not sustain the Covid shock. Besides, many businesses are still in trouble due to inflation, gas shortage and record fuel price hike.

According to the Registrar of Joint Stock Companies and Firms, the number of companies liquidated in FY18, FY19, FY20, FY21 and FY22 are 108, 131, 93, 143 and 281, in that order.

Businessmen who liquidated their firms said they were not able to salvage the companies even with the stimulus loans provided by the government because of business ailments going back years.

Middly Fashion Ltd, an apparel exporter located in Savar wound up in 2020, had been suffering from internal disputes.

The stakeholders were reluctant about dealing with the company's financial affairs, said Middly's former Managing Director Hasibur Rahman. Besides, the bank loans were mounting, pushing the apparel exporter to the end game.

The winding up account of Dhaka's Shafin Wooden Board Ltd sounds similar to Middly.

Russell Lodge Holdings Ltd, a realtor liquidated in June this year, had to face a court order to close the business. A land owner who signed a deal with the company ten years ago filed a liquidation plea with the court, as he said the realtor did not complete the promised housing project and hand over his apartments even after a decade.

An official of Northern Consumer Products Ltd, another firm that filed a liquidation plea with the Registrar of Joint Stock Companies and Firms, said the company was unable to stay afloat due to a Covid-led business collapse.

Sheikh Shoebul Alam, registrar of the Registrar of Joint Stock Companies and Firms, said companies are like artificial living entities that cannot die on their own.

"Therefore, we have to complete several procedures and then let the company die," he commented. "Liquidation is a legal process by which a business ceases its legal existence and wraps up operations."

Md Jashim Uddin, president of the Federation of Bangladesh Chambers of Commerce & Industries (FBCCI), said the pandemic cannot solely be held responsible for the business closure.

"It is appropriate to say that companies that were already ill could not survive the Covid shock," he added.

PRI Executive Director Ahsan H Mansur believes the authorities are also responsible for ensuring that firms are administered properly. He said trade bodies too have a moral responsibility to lend a hand to ailing businesses.

Many companies also sprang up during Covid

Rajshahi's Nazmul Hossain Rony registered a company named "Soviet Mechinariz'" in late 2020. He said he used to buy imported pharmaceutical equipment and sell it to local companies.

"I used to do retail business. Demand for medical equipment increased during the pandemic and I seized the opportunity to open my own business," he told TBS.

"Now I am importing pharmaceutical equipment from China, Russia and the UK. My business is going pretty well," he added.

Like his company, many new entities – especially imports, exports and e-commerce platforms – availed registration even during the pandemic.

In FY22, some 13,218 companies and firms took out business registration. The number was 6,945 in FY19, 11,128 in FY20 and 14,826 in FY21.

A spike in online shopping and food deliveries led to the registration boom even during the pandemic, said officials.

Many took out registration as the country faced a resurgence in remittances during the pandemic, according to Senior Commerce Secretary Tapan Kanti Ghosh.

"Besides, people have innovated many new businesses, contributing to the registration surge," he added.