Foreign Investors Doing Business In Bangladesh
ENTRY OPTIONS INTO BANGLADESH. A foreign investor intending to do business in Bangladesh has 3 options, and may establish its presence through:
1. Locally registered company
2. Branch office
3. Liaison office
1. LOCALLY REGISTERED COMPANY. Incorporating or acquiring a locally registered company offers the most flexible option to the investor. Foreign investors are allowed to invest or own shares or incorporate companies in most sectors. Prior approval is required for some sectors. Foreign investors may also establish a joint venture company with either a local or another foreign investor. The company may take the form of either a private or public limited company. For the purposes of taxes, a locally registered company will be considered as a domestic company.
How to Locally Register a Company
Step 1: Apply to obtain name clearance from the RJSC. After applying for name clearance, the Registrar of Joint Stock Companies and Firms (“RJSC”) will verify that the chosen company name is not similar to any existing name in their database. If the document confirming the name clearance is issued, it will be valid for 180 days and the investor must complete the company registration prior to this period or apply for an extension of the name clearance.
Step 2: Opening a Temporary Bank Account for Remitting Paid-up Capital. Along with the document confirming name clearance, the foreign investor is required to open a temporary bank account in the name of the proposed company. The draft Memorandum and Articles of Association will also need to be submitted. The purpose of opening the bank account would be to remit the paid-up capital. The remitted amount must be equal to the paid-up capital of the foreign investor. The bank will then issue an encashment certificate, which will be required by RJSC at the time of incorporation. The temporary bank account will become a regular account upon incorporation of the company.
Step 3: Incorporation of the Company. The next step would be to finalize the Memorandum and Articles of Association. These need to be submitted to RJSC through its website. According to the guidance published by RJSC. Required information and documents include:
- Notice of Situation of Registered Office (Form VI)
- Particulars of Directors, Managers, Managing Agents (Form XII)
- List of Persons Consenting to be Directors (Form X)
- Subscriber Page
- Particulars of Shareholders
- Declaration on Registration of Company (Form I)
- Consent of Directors to Act (Form IX)
- Memorandum and Articles of Association
- Name Clearance Certificate
- TIN Certificate for Directors
- Encashment Certificate
- For Foreigners: Copy of passport for Shareholders and Directors
Other information, documents, or items that may further be required at the time incorporation include:
- Share certificates for every shareholder
- Particulars of Shareholders
- Company Seal
After submission of all required documents, payment of registration and filing fee will have to be made to the bank. RJSC officials will then verify the information and documents. RJSC, upon its satisfaction, will issue the Certificate of Incorporation along with a digitally certified copy of the Memorandum and Articles of Association and Form XII.
Once the company is incorporated, the foreign investor must then file annual returns and also regular returns in the event of any relevant change to the company structure with the RJSC.
Private investment is restricted in the following sectors:
- Arms and ammunitions and other military equipment and machinery;
- Nuclear power;
- Security printing and minting; and
- Forestation and mechanized extraction within the boundary of reserved forest.
Prior Approval from relevant ministries/authorities is required for establishing business in the following sectors:
- Fishing in the deep sea
- Bank/financial institution
- Insurance company
- Generation, supply and distribution of power
- Exploration, extraction and supply of natural gas/oil
- Exploration, extraction and supply of coal
- Exploration, extraction and supply of other mineral resources
- Large-scale infrastructure project (e.g. flyover, elevated expressway, monorail, economic zone, inland container depot/container freight station)
- Crude oil refinery (recycling/refining of lube oil used as fuel)
- Medium and large industry using natural gas/condescend and other minerals as raw material
- Telecommunication service (mobile/cellular and land phone)
- Satellite channel
- Cargo/passenger aviation
- Sea-bound Ship Transport
- Sea-port/Deep sea-port
- VOIP/IP Telephone
- Industries using heavy minerals accumulated from sea beach
2. BRANCH OFFICE. An investor may conduct business in Bangladesh by establishing a branch office of its foreign company. A branch office operates similar to a company except that it is only permitted to conduct business in areas permitted by the Bangladesh Investment and Development Authority (“BIDA”). The permission to operate as a branch office is also subject to renewal after 3 years. However, the winding down process of a branch office is far less complicated than a company. A branch office is an extension of the foreign company, whereas a locally registered company is a separate entity from the foreign company,
In addition to obtaining approval by the BIDA, a Branch Office must also register with the Registrar of Joint Stock Companies and Firms (“RJSC”) and comply with its obligations under the Companies Act.
3. LIAISON OFFICE. A liaison office allows the foreign investor to establish a more direct communication channel with the Bangladesh market. A liaison office is not permitted to conduct any commercial activity. According to the BIDA, the only activities a liaison office is permitted to undertake are the following:
- maintain liaison/coordination between principal and local agents, distributors/exporters’ institutions through correspondences, personal contracts and other electronic media.
- collect, compile analyze and disseminate business information related to its field of activities as mentioned in the approval letter.
All costs associated with the liaison office must be paid by the foreign investor through inward remittance. No outward remittance from Bangladesh sources will be permitted.
Similar to a branch office, establishing a liaison office requires approval from BIDA and must register with the RJSC.
How to open a Branch or Liaison Office?
Step 1: Obtaining Permission from the Bangladesh Investment and Development Authority (BIDA)
In order to open a branch office or a liaison office in Bangladesh, it is necessary to obtain permission from BIDA. To apply for permission, the following documents are required:
- Completed and signed application form.
- Certificate of Incorporation of the foreign company
- MOA and AOA of the foreign company
- Particulars of the directors/promoters of the foreign company.
- Audited accounts of the last financial year of the foreign company.
- Board resolution approving the establishment of the branch office or liaison office
- Proposed organogram of the office detailing the posts occupied by local and foreign personnel
- Particulars of proposed activities.
The documents must be attested by the Bangladesh Embassy or High Commission of the country of origin. Alternatively, it may be attested by the Apex Chamber of Commerce of the country of origin. Additionally, BDT 25,000 must be paid and the Pay Order must be submitted to BIDA. BIDA may request further documents or information as part of the application process. The application along with the documents will be reviewed by the Inter-Ministerial Committee. If the application is approved, BIDA will issue an approval letter. The approval is valid for three years.
Step 2: Opening a Bank for Remitting Establishment and Initial Operational Cost. After approval from BIDA, a bank account must be opened. The purpose of opening the bank account is to remit at least USD 50,000. The remittance is intended to cover establishment and operational costs of the first 6 months. The foreign investor must remit this amount within two months from the date of approval from BIDA.
Step 3: Register with the RJSC. The final step is to register the branch or liaison office with the RJSC. To register with the RJSC, the following information or documents will be required:
- Approval letter from BIDA
- Certified copies of all constitutional documents
- A list of all Directors and Secretary
- Address of the principal place of business
- Address of the principal place of business in Bangladesh
- The name and address of every person authorized to accept any document that must be served on the foreign company.