Registration of a Private Limited Company in Bangladesh in 2022 | 5 Simple Steps

Registration of a Private Limited Company in Bangladesh in 2022 | 5 Simple Steps

Registration of a Private Limited Company in Bangladesh in 2022

Meheruba Mahbub

Meheruba Mahbub
 Senior Associate, Counsels Law Partners

24 Jan 2022

This article will explain in details about formation and registration of a Private Limited Company in Bangladesh.

It will focus on five easy steps: business name clearance, drafting required documents, opening a bank account, company registration with the RJSC, and post registration formalities.

Moreover, it will outline essential points for foreign investors and alternative ways to set up a company in Bangladesh.

, Private Limited Company in Bangladesh

There are five ways of doing business in Bangladesh:

Registration of a Private Limited Company is the most common way of doing business as PLC is a typical legal entity for Bangladeshi businesses. As per the Companies Act 1994 a Private Limited Company has the following characteristics:

  • It restricts the ability to transfer shares [section 2(q)]
  • The minimum number of members is 2 (two) [s. 5]; the maximum number of members is 50 (fifty), excluding employees of the Company [s. 2(q)].
  • It must have at least two directors [s. 90 (2)]
  • It prohibits any public invitation to subscribe for the Company’s shares or debentures [s. 2(q)].

After completion of Registration of a Private Limited Company in Bangladesh, it can begin operations as soon as it is registered with  The Registrar of Joint Stock Companies (RJSC), subject to obtaining the other licenses listed below in the post-registration section of this Report.

    Procedure for Registration of a Private Limited Company in Bangladesh

    The 5 steps listed below correctly outlines the procedure for the registration of a Private Limited Company in Bangladesh.

    Step 1: Business Name Clearance 

    The first step in forming a private limited company in Bangladesh is to fix a desired name for the company.  Following the selection of a name, the applicant must apply for name clearance in order to obtain the name approval certificate RJSC.

    The certificate is usually delivered within 1 to 2 days. Investors are required to pay RJSC the necessary fees for name clearance and verification.The government fee for name clearance is currently 230 BDT or  around 3 USD.

    Step 2: Drafting Required Documents

    In order to form a Private Limited company in Bangladesh, a Memorandum of Association (MoA) and Articles of association (AoA) must be prepared by the company.

    Drafting Memorandum of Association (MoA):

    A limited company’s Memorandum of Association (MOA) states the company’s objectives, company’s authorized capital, and list of the shareholders along with their respective shareholdings.

    However, it should be noted that in order to begin a banking, finance, school, or hospital business, prior approval from the relevant authority is required.

    Drafting Articles of Association (AoA):

    The AoA outlines all of the regulations that govern how a limited company operates. The AoA should include the number and list of directors, the board’s power, the Managing Director’s power, the meeting process, quorum, notice procedure, and the appointment of auditors.

    It also specifies how the company’s bank account will be managed.

     

     

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    Step 3: Opening a Bank Account

    To start a private limited company in Bangladesh, you will need to open a temporary bank account in the proposed company name with any scheduled bank in Bangladesh.  

    This stage is solely applicable if the proposed company has foreign shareholding. The following documents need to be filed to the respective banks in order to open the bank account:

    • Name Clearance
    • Draft copy of your MoA and AoA
    • Board Resolutions of the foreign company
    • Passports copies of the representative shareholders
    • bank account opening forms.

    Foreign investors wanting to form a private limited company in Bangladesh must deposit the requisite paid-up capital into the company’s bank account.

    The remitted funds will be held by the bank. The bank will produce an Encashment Certificate, which will be required by RJSC in order for the company to be incorporated.

    This certificate states that the appropriate capital contribution has been duly deposited in the proposed company’s temporary bank account.

     

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    Step 4: Company Registration with the RJSC

    In order to register the private limited company in Bangladesh, all the required information and documents must be submitted to the RJSC. They are as follows:

    • Details of Directors (name, parents name, passport number, email ID, mobile number)
    • National Identification Number (if Bangladeshi national)
    • Tax Identification Number (if Bangladeshi national)
    • Limit of paid up capital and authorized capital
    • Photo of all shareholders (1 copy)
    • Address of the company
    • Signatories of the bank account

    The registration fee and stamp duty must be paid in the RJSC’s designated bank.
    The government fee will be calculated depending on the proposed company’s approved share capital.
    A certificate of incorporation must be obtained from the RJSC after all processes have been completed successfully in order to register a private limited company in Bangladesh.

    Step 5: Post-registration Formalities

    After successful company formation, the last step in order to form a private limited company in Bangladesh is to acquire the following certificates/licenses:

    (a) Trade License 

    The companies must obtain a trade license from the local authorities. The proposed Company must submit an application to the local City Corporation, together with all essential paperwork and payments.

    The cost of getting a trade license is around USD 200, and it can be renewed annually. Three to four working days are typically required to receive it.

    b) TIN (Tax Identification Number)

    A private limited company in Bangladesh must obtain an E-TIN from the National Board of Revenue‘s (NBR) website, which can be done free of cost.

    c) VAT Registration Certificate

    The newly formed company must also obtain a VAT registration Certificate from the National Board of Revenue. This should take about 5-7 working days.

    d) Fire Certificate

    Bangladesh Fire Service and Civil Defense Authority will need to issue a fire certificate to the private limited company.

    e) Environmental Clearance Certificate

    A private limited company in Bangladesh must collect an environment clearance certificate from the Department of Environment if it intends to be involved in industrial activity.

    Furthermore, each year, the company must submit to the RJSC the following documents:

    • Schedule X which is a list of shareholders and an annual summary of share capital.
    • Balance Sheet within 30 days of Annual General Meeting (AGM).
    • Profit and Loss Account within 30 days of AGM.
      Form 23B which is a letter of approval from the auditor that must be provided within 30 days of the appointment date.
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    If you want to open a liaison office in Bangladesh or about branch formation click here!

    • Step by Step Process of forming a liaison office in Bangladesh

    Essential Information for Foreign Investors

    Foreign investors need to keep the following things in mind when they plan to form a private limited company in Bangladesh:

    • The costs of registering a company are primarily determined by the company’s authorized capital. The average cost is between USD 1800.
    • Shelf companies are not permitted and must have a physical place of business in Bangladesh.
    • Bangladesh Forex Regulations allow for the full repatriation of profits and investments.
    • Foreign nationals may be employed at a 20:1 (local: expat) ratio, subject to obtaining the necessary work permit.
    • Except in a few restricted areas, 100 percent FDI investment is permitted.
    • Directors can be either foreign or domestic nationals.
    • The typical corporate income tax rate ranges from 25% to 45 percent, depending on the sector and nature of the company.

      However, tax exemptions are available for selected sectors and areas for 5-7 years.

    • There are also additional tax exemptions  for investing in Special Economic Zones.

     

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    What are some alternative ways to set up a company in Bangladesh?

    Branch Office:

    A branch  is not a separate incorporated entity, but rather an extension of its parent company. In other words, the parent company is liable for the liabilities of its branches. 

    With Bangladesh Investment Development Authority’s (BIDA) approval, a branch can engage in commercial activities. The Exchange Control Guidelines, on the other hand, strictly monitor its operation.
    In Bangladesh, the average time to open a branch officis 45- 60 days.

    Liason Office:

    A liaison, also known as a representative office, is subject to BIDA approval  similarly as a branch.

    It must have an overseas parent company, and its activities are limited because it only serves as a communication or coordination instrument for Bangladesh’s business resources.

    Also, keep in mind that a liaison office in Bangladesh cannot earn any local income. Through remittance, the parent company bears all of its expenses and operational cost. It also adheres to the general business registration procedure in Bangladesh.

     

    How To Register A Private Limited Company In Bangladesh Infographics Remura Mahbub

    “To start a private limited company in Bangladesh, you will need to open a temporary bank account in the proposed company name with any scheduled bank in Bangladesh.

     This stage is solely applicable if the proposed company has foreign shareholding.”

     -Meheruba Mahbub

    Are you planning to register a private limited company in Bangladesh?

    Company formation and registration at Tahmidur Rahman CLP:

    The legal team of Tahmidur Rahman, Counsels Law Partners CLP are highly experienced in providing all kinds of services related to forming and registering a Private Limited Company in Bangladesh . For queries or legal assistance, please reach us at:

    E-mail: [email protected]
    Phone: +8801727983838

    Address: Jamilla Villa (4th Floor Flat No-C2 House 4/A/1 Road no: 2 Dhaka 1212

     

    FAQ

    How much money is required for company registration in Bangladesh?

    The governmental fees for registering a company are determined by the amount of authorized capital. Government fees for the issuance of an Incorporation Certificate shall be BDT 1000.

    How long does it take to register a company in Bangladesh?

    Once the aforementioned formalities have been completed, RJSC will usually issue the certificate of incorporation (Company registration certificate) within 6-8 working days.

    It usually takes 2-3 weeks from the date of submission of all documents to RJSC to register a company.

    What is BIDA?

    Bangladesh Investment Development Authority (BIDA) is in charge of facilitating foreign investments in the country.

    BIDA's responsibilities include issuing work permits for foreign employees, visas for foreign investors, processing loans from foreign sources, approving remittance of royalties and technical fees, assisting in the acquisition of industrial plots, facilitating utility connections, approving foreign loans, suppliers credit, and providing assistance and advice on a variety of investment-related issues.

    Foreign investors with industrial projects are strongly advised to register with BIDA after forming their limited company. However, there is no requirement for a commercial or trading company to register with BIDA. The average time frame for obtaining registration is 7-10 working days.

    What documents are needed to set up a private limited company in Bangladesh?

    1. Memorandum of Association
    2. Article of Association
    3. Certificate of Incorporation
    4. Trade License
    5. TIN
    6. VAT Registration Certificate
    7. Name Clearance
    8. Environmental Clearance Certificate
    9. Fire Certificate

    What is the minimum capital required for a private limited company in Bangladesh?

    In Bangladesh, there is no minimum or maximum authorised capital for a local company.

    However, for practical reasons and to obtain complete flexibility in terms of expatriation and bringing in foreign expatriates, a minimum of USD 50,000/- must be invested in the Company.

    Can a single person start a company in Bangladesh?

     Bangladesh does not allow a single person to open a private limited company or One Person Company (OPC).

    A private limited company must have at least two shareholders. In the case of a public limited company, however, the total number of shareholders required is seven.

    Can a private limited company have one director in Bangladesh?

    A private limited company must have at least two directors. Local or foreign nationals may serve as directors.

    Directors must be at least 18 years old and have never been bankrupt or convicted of a crime. A director is required by law to own the qualification shares specified in the Articles of Association.

    What is the difference between authorised capital and paid-up capital?

    - Authorised capital: The amount of authorised capital must be specified in the Memorandum of Association and Articles of Association. It is the maximum amount of share capital that a company may allocate to shareholders.  

    In Bangladesh, there is no minimum or maximum authorised capital for a local company. However, for practical reasons and to obtain complete flexibility in terms of expatriation and bringing in foreign expatriates, a minimum of USD 50000/- must be invested in the Company.

    -Paid-Up Capital : The minimum paid-up capital for registering a Bangladeshi company is Taka 1 (for local companies) and USD 50000 (for foreign companies).

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    Author’s Bio
    About Meheruba Mahbub | One of the most innovative young lawyers in Bangladesh

    Meheruba Mahbub is a finance partner and one of the Bangladesh's market leading international lawyers. She is head of the firm's Mergers and Acquisitions practice, which advises corporates and financial institutions on outbound and inbound investments, projects and financings.

    Meheruba has a diverse finance practice , representing large banks, financial sponsors, and corporations. She specializes in acquisition and structured financings, loan portfolio purchase and financing, real estate financings, and inbound and outbound transactions. She has extensive expertise in the energy and infrastructure industries.
    Work highlights

    Meheruba has acted on many high-profile Finance and Commercial deals in Bangladesh and India. These include advising:

    ⦾ Standard Chartered Bank on the sale of a portfolio of loans in Bangladesh, the first in a series of similar deals in Bangladesh as part of the government’s directive to banks to focus on the robustness of their balance sheets.

    ⦾ the lending and underwriting banks on the refinancing of US$6.9bn worth of debt uninsured by the Summit Group

    ⦾ Brookfield Property Partners on the acquisition and financing of Unitech’s real estate portfolio

    ⦾ Enron on the US$3bn Dhabol power project (since renamed Ratnagiri Gas and Power), the first ever inward investment into the power sector

    ⦾ the sponsor and borrowers on the Sakhalin LNG project, the world’s largest integrated oil and gas project and the largest LNG financing in Russia

    Email: [email protected]

    Address: 2 Turner Street, Canning Town, E16 1FH, United Kingdom

    Gender: Female

    Job Title: Barrister and Senior Associate

    Have a Different Question?

    Email us anytime : [email protected]

    Or call — +8801727983838

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    This post will explain in details about Overseas Financing & Foreign loans for Bangladeshi Companies- How to take foreign loans in Bangladesh in 2022. Here in this post we explain the Procedure & Guidelines for the required approval of foreign loans by Bangladeshi Companies.

    Table of Contents

    Find the subsections below, If you want to jump through specific sections instead of reading the whole article.

    Foreign Loans

    Overseas Financing by Bangladeshi Companies 

    Over the last decade, obtaining a foreign loan by Bangladeshi entities or companies, have increasingly become a routine occurrence. Bangladeshi companies choose international loans for a variety of reasons, including lower interest rates and the ability to borrow a big sum from a single lender.

    The Government of Bangladesh has been enabling foreign borrowing legally approved by the Scrutiny Committee in order to attract foreign investment in the private sector through simpler long-term financing of industrial projects at lower cost of funds and to relieve strain on foreign currency reserves.

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    Obtaining  foreign Loans in Bangladesh in 2022

    In 2022, Short-term loans from parent corporations and shareholders are now available to foreign-owned service companies as operating capital. Overseas-owned enterprises operating in Bangladesh now have more flexibility in receiving foreign loans according to the Bangladesh Bank.

    According to a notice released by the central bank’s Foreign Exchange Policy Department, foreign-owned service companies can now obtain short-term loans as working capital from their parent companies and shareholders for essential business needs (FEPD).

    Previously, such loans were exclusively available to foreign-owned industrial businesses that participated in manufacturing. Such loans were not available to service or trading enterprises. However, service businesses can now take out such loans as well.

    The central bank further stated that such a loan might be available in convertible foreign currencies for a maximum of six years from the start of manufacturing and/or service output operations, with the opportunity to renew or extend the term during that time. Borrowing businesses may pay interest at a maximum of 3% per year until additional instructions are issued, with all other relevant transaction directions remaining intact.

     What are the usual requirements to borrow?

    Though each foreign lender has its unique set of criteria, the following is a summary of some of the most frequent requirements that a company may be expected to meet before acquiring the foreign loan.

     

    • Borrower possesses the necessary licences and permits to operate its business.
    • The borrower’s business records are up to date.
    • Borrower is a firm that is conscious about the environment.
    • All industry standard certifications have been obtained by the borrower (e.g. ISO certification).
    • Borrower is a company that follows all labour laws.
    • The borrower or the project has proper insurance.
    How To Take Foreign Loans In Bangladesh 2022_ Overseas Financing For Bangladeshi Companies_ The Most Complete Guideline For Foreign Loans_ Best Corporate Law Firm In Dhaka

    Step by Step requirements and all the possible documents that you may need

    When the documents are issued, they will be thoroughly reviewed by the BIDA Inter-Ministerial Committee. When the committee is content with the verification then they may give the approval or can obtain additional documentation. Hence it is important to carefully prepare the papers.

     

    • The Company’s Board of Directors approval for the proposed foreign loan.
    • Copy of the most recent BIDA registration form, duly attested by a First Class Gazette officer;
    • Original copy of the parties’ Loan Agreement; (For the lender, a copy of the detailed repayment schedule; original copy of the grade period;)
    •  CIB Inquiry Forms 1&2 duly completed, as well as an undertaking from its Sponsors or Directors;
    • Sponsors’ or directors’ credentials;
    • The company’s and its sponsors’ CIB certificates;
    •  Record of previous foreign loans/deferred payments (if available);
    • Audited previous year’s balance sheet;
    • Utilization Certificate from nominated bank;
    • Latest company credit rating report;
    • Latest financial analysis 
    • Updated feasibility report of the proposed project in detail;
    • Form-X, Form-XII and Form-XV from RJSC&F;
    • Certificate of Incorporation of commencement;
    • Memorandum & Articles of Association;
    • Proforma Invoice or Price Quotation (where applicable);
    • Original copy of the Bank Solvency Certificate;
    • Descriptive statement of the use of the loan;
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    Criteria for foreign borrowing

    Foreign lenders typically conduct extensive due diligence on the borrower. Financial due diligence is typically performed by the lender; however, for technical, environmental, and legal due diligence, the lender may hire external consultants. The borrower will be responsible for the costs of these consultants.

    The lender may require the borrower to appoint a process agent in the country of its choosing,  an auditor affiliated with an international auditing firm; and a compliance manager. The auditor and compliance manager may require a timely report to be submitted directly to the lender following disbursement.

    Other Relevant Criterias for Foreign Loans

    i. Debt-to-equity ratio: The debt-to-equity ratio based on anticipated borrowing should be kept to a bearable level. While relatively higher debt levels may be warranted for long gestation infrastructure projects, total debt including the proposed borrowing should not breach 70:30 debt equity ratio even for these projects;

    ii. Liabilities to the Government: There should be absolutely no liability to the government, either in Taka or in foreclosed property.

    iii. Status of implementation and utilization report of authorized foreign borrowing: On a semi-annual basis, the borrowing firm must submit to the BOI the status of implementation and utilization report of the approved loan in the specified format.

    iv) If capital machinery and equipment to be bought: Quality, price, and economic life; The capital machinery and equipment to be procured with the proposed borrowing should either be brand new or, if refurbished, have a sufficient useful life as specified by the Government’s Import Policy Order.

    v) Validity of the approval: The Scrutiny Committee’s approval of foreign borrowing is valid for 6 (six) months from the date of the BOI’s permission letter. 

    Vi) Common Terms:
    a) The borrowing firm must follow Bangladesh Bank’s laws and regulations on the use and repayment of the loan, as well as the interest thereon.

    Foreign Loans In Bangladesh

    What are the due dilligence you may expect from your foreign lenders?

    Foreign lenders typically conduct extensive due diligence on the borrower. Financial due diligence is typically performed by the lender; however, for technical, environmental, and legal due diligence, the lender may hire external consultants. The borrower will be responsible for the costs of these consultants.

    The lender may require the borrower to appoint a process agent in the country of its choosing,  an auditor affiliated with an international auditing firm; and a compliance manager. The auditor and compliance manager may require a timely report to be submitted directly to the lender following disbursement.

    How to get the BIDA Clearance for Foreign Loan in Bangladesh

    After obtaining the prescribed application from BIDA, the applicant must submit the aforementioned documents, along with the applicable licence fee, to the Security Committee of Bangladesh Bank for review. If the committee grants clearance after reviewing the submitted documents, BIDA will grant the loan in accordance with their recommendation.

    The official time limit for such a process will be entirely dependent on the Borrower for document collection and, to a lesser extent, on the Scrutiny Committee to conduct the meeting, and the fee schedule for approval will be tentatively between BDT 5k and BDT 100k depending on the amount of lending.

    How to get a Trade License in Bangladesh?

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    Regulatory Permissions from Bangladesh Bank and Board of Investment (BOI).

     

    Foreign loans with a term of less than a year require Bangladesh Bank’s prior authorization. The Board of Investment must authorize all other foreign loans (including supplier credits, financial loans from institutions or individuals, and debt issuance in international capital markets) (BOI).

    Borrowers in special economic zones, such as the EPZs, are eligible for certain concessions (Export Processing Zone).

    It normally takes three to six months for the BOI to approve the application. The loan must be applied for using a stipulated application form, which, along with accompanying documentation, must clearly state the loan’s purpose and planned usage by the borrower, as well as the repayment schedule with dates and amounts, and interest payment dates and amounts.

    The following documents must be supplied with the application as supporting documentation:

    • The term sheet, facility agreement, and security documents are all part of the loan documentation. These may be submitted in draft form:
    • The borrower’s corporate documents, such as the memorandum and articles of association; resolutions of the borrower’s Board of Directors approving the foreign loan on the terms and conditions reflected in the loan documentation and the application;
    • If the loan is to be used to import any equipment, a pro-forma invoice for that equipment;
    • Report covering key financial and commercial matters in in respect of the loan and related project.

    Foreign loans from Multilateral Development Banks

    Each of the major Multilateral Development Banks, including the Asian Development Bank and the World Bank, has a Commercial Liaison Office run by the Commercial Service.

    These financial organizations lend billions of dollars to initiatives in developing nations like Bangladesh that aim to boost economic growth and social development by decreasing poverty and inequality, increasing health and education, and expanding infrastructure development.

    The Commercial Liaison Offices assist American firms in learning how to participate in bank-financed projects and lobby on their behalf.

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    General Questions that people ask about Foreign Loans in Bangladesh

     

    Is it possible to receive international venture capital funding to launch a business in Bangladesh?

    IFC and IDLC funding helped Chaldaal, a food e-commerce firm, raise US$ 5.5 million. This is a positive indicator since if the business thrives, additional financial institutions may be willing to invest in it. Sindabad, a B2B e-commerce, received US$ 4.2 million from Aavishkaar, an Indian Impact Fund. Handy Mama, C-work, Gaze, and Beatles are among the four start-ups that BD Venture has invested in. They joined other Angel Investors in a second round investment in Esoshikhi, an educational technology. The government has set aside Tk 1 billion in the budget for new business ventures. However, the specifics of how that cash will be used have yet to be determined. The cabinet recently approved the ICT Ministry's initiative to establish a venture capital business.

    Can I take loan from foreign bank in Bangladesh?

    A company can obtain a soft loan in one of two ways: automatically or through the government: The automatic method allows a borrower to get a loan from a foreign firm without first obtaining clearance from Bangladesh's Central Bank. The loan arrangement must, however, be recorded with the BIDA in this case.

    How to determine the existing indebtedness structure and creditworthiness of the borrowing company?

    (a) CIB report: A CIB report will be needed for all proposals to be processed. The CIB report will be collected by BOI from Bangladesh Bank. (a) Bank certificate: Existing indebtedness structure and creditworthiness of the sponsors involved, duly confirmed by their bankers, will be required for foreign borrowing permission. The chosen bank will submit to BOI the required inquiry papers as well as an undertaking from the borrowing company's Sponsor Directors.

    What are the funding programs for Bangladeshi Entrepreneurs?

    Robi, a mobile telecom business, has overhauled its Accelerator program. They broadened the scope by allowing applications from anybody in Robi payroll. They expanded its coverage to include all of Bangladesh. They got almost 2200 applications, of which 56 were chosen for pitching. Finally, eight funds and incubation facilities were given. These programs were aired on television in order to raise awareness and encourage people about the notion of entrepreneurship. Grameenphone has renamed its Accelerator program GP Accelerator 2.0, which is divided into two parts: Pre-Accelerator and Accelerator. Pre-Accelerator is an 8-week program that provides training and coaching to assist verify their concept and get it to market. The accelerator is a 4.5-month program for teams with a Minimum Viable Product (MVP).

    How to determine the Quality & Commercial viability of the project for Foreign Loan?

    The following financial analyses are necessary to verify the quality/commercial viability of the project feasibility study; a) The project's internal rate of return (IRR) b) The payback period c) The break-even point at what capacity and what time of year d) A sensitivity analysis in terms of IRR d) Ratio of Debt Service Coverage (DSCR)

    What are the challenges regarding overseas financing in Bangladesh?

    Globally, governments that backed startups saw an increase in their GDP. In the fourth industrial revolution period, creativity and technology assistance are critical for competing in global marketplaces. As a result, startups should be at the top of everyone's priority list. It is a priority for our government, but it should be represented at all levels of policy making. Our entrepreneurs have difficulties in obtaining trade licenses, intellectual property rights, and other business licenses and permissions. Foreign investors are hesitant to invest in a company that lacks all necessary legal documentation. Foreign investors are likewise unconvinced about the ease with which they might abandon their investments. Regional centers such as Singapore and China have vast amounts of money to invest, yet we are unable to entice them to engage in our enterprises.

    Can an individual from Bangladesh take loan in foreign currency?

    Provided, however, that for sufficient reasons, the Central Bank may permit a person resident in Bangladesh to borrow or lend in foreign exchange from or to a person resident in or outside Bangladesh, and/or permit a person resident in Bangladesh to borrow or lend in BDT from or to a person resident outside Bangladesh.

    Can a foreign director give loan to Bangladeshi company?

    Yes, it is permitted.  But bear in mind, a company cannot lend to a director without paying taxes, while a director can lend to a company.

    How do I record a loan repayment?

    When your company records a loan payment, you debit the loan account to remove the liability from your books and credit the cash account. Repayments on an amortized loan are made over time to meet interest expenditures and principle reduction.

    What are the 3 classification of loans in Bangladesh?

    A loan is a sum of money borrowed from a lender by an individual or a business. It is divided into three types: unsecured and secured loans, conventional loans, and open-end and closed-end loans. Before any money crosses hands, the beneficiary and the lender must agree on the conditions of the loan. In some situations, the lender may compel the borrower to put up an asset as collateral, which will be specified in the loan agreement. Individuals, businesses, and governments can all get loans. The major reason for taking one out is to obtain funds to increase one's total money supply. The lender earns money by charging interest and fees.

    Company Law practice in Counsels Law Partners 

    The Barristers, Advocates, and lawyers at CLP Law chamber in Gulshan, Dhaka, Bangladesh are highly experienced at assisting clients in dealing with and registering branch offices in Bangladesh.   For queries or legal assistance to set up a branch office in Bangladesh, please reach us at:

    E-mail: [email protected]
    Phone: +8801727983838
    Jamilla Villa (4th Floor Flat No-C2 House 4/A/1 Road no: 2, Gulshan 1, Dhaka, 1212

     

    How To Take Foreign Loans In Bangladesh 2022_ Overseas Financing For Bangladeshi Companies_ The Most Complete Guideline For Foreign Loans_Best Company Law Firm In Bangladesh

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    Procedure of Foreign Investment in Bangladesh 2020| Law, Policy, Direct, Angel, Rules, Policy- Everything you need to know about Foreign Investment in 21st century Bangladesh

    Tahmidgoldenpicturebackground E1569742859700

    Tahmidur Rahman
     Director and Senior Associate, Counsels Law Partners

    17 Jan 2020

    Procedure of foreign investment in Bangladesh: Leading up to initiating a major investment , investors needs to navigate the basic legal policies on investment law in Bangladesh. Bangladesh is one of the easiest countries in the world to do business with straightforward regulation, a well-respected legal system and low entry barriers. Entrepreneurship is also massively respected and encouraged in the country.

    Despite this welcoming atmosphere and a lack of red tape, difficult choices and decisions need to be taken at an early stage, and this article describes everything you need to know about the Procedure of foreign investment in Bangladesh.

    Foreign Investment Policy in Bangladesh & Procedure of foreign investment in Bangladesh

     

    The Government of Bangladesh has put in place a wide range of policies aimed at bringing substantial socio-economic changes to the citizens of Bangladesh and, eventually, self-reliance to the country, which would in turn pave the way for seamless procedure of foreign investment in Bangladesh.

    In recognition of the capacity of the private sector to contribute to the achievement of these objectives, the government has recently initiated a number of major policy reforms, which are planned to create a more transparent and competitive environment for foreign investment in Bangladesh.

    In order to achieve the goal of accelerating industrial growth and increasing the share of industry in the Gross Domestic Product ( GDP) and to make industrial policy sensitive to changes in the global economy, the current government announced an Industrial Policy in 1999. 

     The core characteristics of the 1999 industrial strategy are as follows: 

    • To draw foreign direct investment in Bangladesh,  both export and domestic market-oriented industries to compensate for the lack of domestic investment opportunities and to acquire emerging technology and to gain access to export markets, so that the Procedure of foreign investment in Bangladesh bangladesh gets even easier.
    • To ensure the sustainable growth of industrial jobs by promoting investment in labour-intensive manufacturing sectors, including investment in productive small and cottage sectors.
    • Diversifying and increasingly increasing the production of manufacturing.
    • Coordinate economic and fiscal policies to inspire a growth in foreign investment in Bangladesh.
    • Promote the competitive strength of import substituting industries for catering to a rising domestic market.
    • To increase the production base of the economy by increasing the pace of industrial investment to ease the procedure of foreign investment in Bangladesh .
    • Promote the private sector to drive the development of industrial production and investment and making the Procedure of foreign investment in Bangladesh way easier.
    • Emphasis on the role of the government as a facilitator in creating an enabling environment for the expansion of private investment and the procedure of foreign investment in Bangladesh.

    Investment Structures in Bangladesh and Procedure of foreign investment in Bangladesh

    Bangladesh offers generous opportunities for investment under its relaxed Industrial Policy and export-oriented, private sector-led growth strategy. Except for the previously stated reserved sectors, foreign investors are free to make investments in Bangladesh in industrial enterprises.

    In regards to Procedure of foreign investment in Bangladesh, Foreign companies wishing to do business or establish a presence in Bangladesh have a number of options.

    1.  Foreign Direct Investment in Bangladesh

    FDI (foreign direct investment in Bangladesh) in industrial or construction projects must be registered with the Bangladesh Investment Development Authority (BIDA).

    BIDA, formerly known as the Investment Board, was formed by the Bangladesh Investment Development Authority Act 2016 to deal with issues related to FDI and to promote investment in Bangladesh.

    The foreign direct investment (FDI) inflow at the end of June 2018 amounted to USD 2.58 billion (foreign investment in Bangladesh stats, Bangladesh bank).

    The Bangladesh Investment Development Authority (BIDA) announced an impressive 13.34% rise in FDI in the third quarter of 2018, receiving proposals worth USD 3.23 billion over the same period, suggesting strong interest on the part of foreign investors.

    The key objective of BIDA is to encourage domestic and foreign investment as well as improve Bangladesh’s international competitiveness. BIDA also provides the necessary facilities and assistance for the establishment of industries.

    In regards to the Procedure of foreign investment in Bangladesh, determining the route of investment usually depends on the specific sector and the policy of the FDI adopted by the Government in regards to foreign investment in Bangladesh. 

    2. Wholly owned subsidiaries in Bangladesh

    Foreign companies are allowed to create wholly-owned subsidiaries in Bangladesh. Such companies may be known as private limited or public limited companies. Foreign equity ownership can be up to 100% in most sectors, including construction, information technology and production.

    Foreign entities can acquire an existing Bangladeshi company or incorporate a new company that complies with the requirements of the Registrar of Joint Stock Companies and Firms (RJSC). Subsidiaries are entitled to remit dividends reported on income after tax.

    3. Joint Ventures in Bangladesh (Foreign Investment in Bangladesh)

    As with wholly-owned subsidiaries, international companies can have joint venture companies with Bangladeshi partners. The equity ownership of a foreign corporation would depend on the sector in which it is invested.

    Foreign Investment In Bangladesh_How Foreign Investment Works In Bangladesh

    If you want to know everything about Branch office registration in Bangladesh!

    4. Setting up a Branch or Liasion offices in Bangladesh for foreign investors

    International companies can also create a presence in Bangladesh through a representative office, liaison office or branch office for the purpose of foreign investment in Bangladesh.

    Typically foreign companies that do not have local earnings in Bangladesh may choose to set up representative offices, liaison offices or branches.

    The operations of these organizations are limited to those set out in their BIDA approvals and are subject to strict compliance with the foreign exchange regulations.

    Generally, no outward remittance of any kind from Bangladesh is allowed unless expressly approved by the Foreign Exchange Regulations or the Bangladesh Bank.

    fSuch offices are expected to pay inward remittances of at least USD 50,000 within two months from the date of establishment as a cost of establishment.

    One of the requisite approvals for the establishment is that security clearance must be obtained from the Ministry of Home Affairs of the Government of Bangladesh. (foreign investment in Bangladesh)

    5. Option of Participating in an existing Bangladeshi company by purchasing shares (procedure of foreign investment in Bangladesh.)

    In regards to foreign investment in Bangladesh, Foreign investors are free to invest in local companies in Bangladesh unless expressly prohibited (as stated above).

    Shares can also be given to foreign investors against capital machinery brought by them to Bangladesh (subject to confirmation by the Customs and Excise Office of the import documents, Procedure of foreign investment in Bangladesh).

    If you want to know how to open a company in Bangladesh or about company formation click here!

    • Step by Step Process of Registering a Company in Bangladesh
    Foreign Investment In Bangladesh_How To Invest In Bangladesh

    Right to Issue and Transfer Shares in Bangladesh – Procedure of foreign investment in Bangladesh.

     

    There is no need for permission from the Bank of Bangladesh to set up such ventures if the entrepreneurs use their own funds. Prior approval of the Central Bank is not necessary for the issuance of shares in favor of non-residents against foreign investment in BD.

     

    Shares may be issues relating to freely convertible foreign exchange brought in from abroad via the banking channel or to the importation of capital machinery or the combination of both.

     

    Foreign exchange thus entered must be paid out in taka before the issuance of shares, except in the case of Type A (full foreign owned) and Type B (joint venture) units of EPZ and EZ, where FC ‘s foreign bright equity of be held in the FC accounts of the units concerned.

     

    Transferring shares and securities in Bangladesh from one shareholder to another shareholder regardless of their nationality / residence does not require approval from Bangladesh Bank.

     

    In the event of a transfer of private / public (non-listed) shares between resident-non-residents or vice versa, a general intimation to Bangladesh Bank is required by the Approved Bank within 14 days of such a transaction.

     

    As there is no established marketplace for such investment in Bangladesh, Bangladesh Bank will accept fair value of the shares as on the date of sale based on a reasonable combination of three valuation approaches (NAV; FMV and DCF), depending on the nature of the company in regards to the Procedure of foreign investment in Bangladesh.

     

    If you want to know everything about Share Transfer process in Bangladesh!

    Procedure Of Foreign Investment In Bangladesh_Best Investment Law Firm In Bangladesh_Tahmidur Rahman

    Full Repatriation of Dividend, Investment and Income for foreign investors in Bangladesh.

    It will enable complete repatriation of the capital invested from free sources in regards to the Procedure of foreign investment in Bangladesh. Profits and dividends accruing to foreign investment can likewise be transferred in full (Procedure of foreign investment in Bangladesh).

    Those would be considered as new investment if foreign investors reinvest their reparable dividends and/or retained earnings. Foreigners living in Bangladesh have the right to remit up to 50 percent of their income and can enjoy facilities for complete repatriation of their savings and pension benefits. (Procedure of foreign investment in Bangladesh.) 

     

    Laws for the Protection of Foreign Investment in Bangladesh

     

    For a seamless procedure of foreign investment in Bangladesh, the government guarantees immunity from nationalisation and expropriation through the 1980 Foreign Private Investment Act that involves repatriation of capital and dividend for foreign investors.

    In addition, to facilitate the Procedure of foreign investment in Bangladesh, Bangladesh has made ample legal provisions to secure intellectual property rights. In addition to the 1980 Foreign Private Investment Act , the government has developed an FDI Policy (Foreign Direct Investment Policy for the Procedure of foreign investment in Bangladesh), which supports easy but efficient investment mechanisms in Bangladesh.

     

    The policy encourages the establishment of enterprises by simplifying the leasing and purchasing process of private property, forming an agency, enabling corporate tax holidays for 7 years (15 years in the power sector) and in some respects introducing an exemption of foreign employees’ income tax for up to 3 years.

     

     

     

    Foreign Investment In Bangladesh_Trends In Foreign Investment In Bangladesh

    Disputes Settlement in regards to the procedure of Foreign Investment in Bangladesh

    In dispute cases alternative conflict settlement is possible under the 2001 Arbitration Act. The Bangladesh International Convention on the Recognition and Compliance of Foreign Arbitral Awards was signed. Bangladesh is also a member of International Centre for Investment Dispute Settlement (ICSID).

    The new law also provides for the implementation without much hindrance of international arbitral awards. Although venturing in a company may be overwhelming, Bangladesh offers investors a safe and resourceful environment suitable for establishing or expanding any company, and it can be said that Bangladesh is in fact a “dream investment destination,” after much consideration.

     

    Visa, Work Permit, Citizenship in Bangladesh (Procedure of foreign investment in Bangladesh)

    For periods ranging from one month to five years prospective foreign investors may apply for visas. Foreign workers must get BIDA / BEZA / BEPZA work permit.

    In an industrial organization the number of expatriate workers can not exceed the ratio of 1:20 (foreign: local) for industrial settings and 1:5 (foreign: local) for commercial establishments.

    Citizenship in a scheduled bank may be subject to investment of USD 1 million or a fixed deposit of USD 2 million. Investors can also get ‘NO Visa Requirement’ exemption for investment of more than USD 10 million.

     

    If you want to know more in details about Visa obtaining process in Bangladesh

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    Carpe Noctem Bangladesh

    Incentives offered to Foreign Investors in Bangladesh

    Bangladesh is keen to boost the economy in a short time and turn the poverty-stricken economy into a developed one. Government investment strategy provides competitive stimulus packages to attract foreign investment. These incentives are updated annually and new incentives are announced, too.

    These installations are subject to certain conditions and are issued by the BIDA. Moreover, Bangladesh gives international investors citizenship, permanent residency and multiple entry visas for their ease of business and ease of the Procedure of foreign investment in Bangladesh.

     

    Investing in the Stock market in Bangladesh

    International investors are eligible to engage in Initial Public Offerings ( IPOs) without regulatory restrictions. In addition , capital gains from listed securities are tax-exempt for private investors and lower tax rates apply to corporations and other organizations.

     

    Import Duty exemption in Bangladesh (Procedure of foreign investment in Bangladesh)

    No import duties are applicable for export-oriented sectors. There are duty exemptions also for some preferred sectors. General exemption of import duties is also available in respect of import of specific Plant & Machinery and spares.

     

    If you want to know everything about Immigration and Citizenship in Bangladesh read this articl

    Foreign Investment In Bangladesh_Entering The Bangladshi Market

    Allowance of Capital repatriation in Bangladesh

    Full repatriation of invested capital, profits and dividends is allowed, subject to applicable taxes to make the process seamless in regards to the Procedure of foreign investment in Bangladesh.

     

    Tax holiday facility in Bangladesh (THF) for seamless procedure of foreign investment in Bangladesh

    Tax holidays are granted to industries subject to the relevant rules and procedures laid down by the National Revenue Board of Bangladesh (NBR). This may vary from 3 to 7 years depending on the location of the establishment. For example, industries located in the Dhaka and Chittagong Divisions (excluding three Hill Tract districts of the Chittagong Division) are exempted for a period of five years.

    This tax holiday scheme, which was scheduled to end in 2015, was extended until June 2019 to create an investor-friendly atmosphere in Bangladesh. Tax holiday facilities are also available to manufacturing units and economic zone developers for a period of 10 years and 12 years respectively, and once again it makes it more seamless, the procedure of foreign investment in Bangladesh.

     

    Special Tax Exemption for the foreign investors in Bangladesh

    Tax exemptions are commonly permitted in the following cases:

    • There will be scope of tax exemption on royalties, technical know-how fees earned by any international partner, business, company and expert;
    • Reasonable income tax-upto-threeyearsforeign technicians working in industries as defined in the respective schedule of income tax regulations;
    • Relevant revenue of a private corporation conducting public infrastructure projects;
    • In regards to capital gains from the sale of shares of limited public company listed on the stock exchange;
    • NGO reported with the NGO Affairs Bureau;
    • Reasonable profits of companies and other sectors defined in the income tax Ordinance

    Depreciation allowance in regards to Tax (Procedure of foreign investment in Bangladesh)

    Depreciation allowance shall be allowed in respect of any house, equipment, factory, furniture, bridge, road or overhead used in any company or industrial undertaking in the measurement of income or gains.

    The third schedule of the Income Tax Ordinance 1984 sets out a list of various types of properties and their corresponding depreciation allowance rates, which usually range from 10 % to 30% of costs.

    The plan also sets out the overview of the usual rate of depreciation allowance, the original rate of depreciation allowance and the accelerated rate of depreciation allowance for various asset groups.

     

    If you want to know more in details about tax submission in Bangladesh click here!

     

    Avoidance of Double Taxation for Foreign Investors

     

    Double taxation for international investors can be avoided on the basis of the Bilateral Double Taxation Avoidance Treaties (DTTs). NBR is responsible for negotiating Double Taxation Agreements (DTAs) with foreign countries to facilitate FDI in Bangladesh.

    The DTA is an arrangement between two countries that aims to prevent double taxation by specifying the taxing rights of each country with respect to cross-border income flows and providing for tax credits or exemptions to remove double taxation for the ease of the Procedure of foreign investment in Bangladesh.

    It also allows for the exchange of information between treaty partners on tax evasion. For instance, Bangladesh has double taxation treaties with  Denmark, France, Germany, Belgium, Canada, China, India, Italy, Japan, Poland, Romania, Singapore, South Korea, Sri Lanka, Sweden, Thailand, The Netherlands, The United Kingdom and other countries.

     

    Foreign Investment In Bangladesh_Top Law Firm In Bangladesh

    Remittance of profits for foreign investors in Bangladesh

    Remittance of income of subsidiaries of foreign companies / companies, dividends / capital gains, wages and savings of expatriates, royalties and technical fees, training and consulting fees, receivables obtained by shipping companies and airlines for freight and transit can be made by approved dealers without the prior approval of the Bangladesh Bank.

    In addition to that the Procedure of foreign investment in Bangladesh are placed in such a way that global entrepreneurs are also entitled to the same facilities as domestic entrepreneurs with regard to tax holidays, dividends, technological know-how fees, etc.

    Business profits and tax exemption for foreign investors in Bangladesh

    The income of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein.

    If the enterprise carries on business as mentioned above, the benefit of the enterprise may be taxed in the other Contracting State, but only in so many cases as is due to that permanent establishment. (Article 7 of the Double Taxation Agreement).

    Dividends and tax exemption for foreign investors in Bangladesh

    Dividends paid by a company resident in a Contracting State to a resident in the other Contracting State may be taxed in the other State.

    However, such dividends may also be taxed in the Contracting State in which the corporation paying the dividends is resident and in compliance with the laws of that State, but where the beneficiary is the beneficial owner of the dividend, the tax paid shall not exceed 10% of the gross sum of such dividends (Article 10 of the Double Taxation Agreement).

    Interest arising from contract state for investors

    Interest occurring in a Contracting State and charged to a citizen of the other Contracting State may be taxed in another State.

    However, such interest may also be taxed in the Contracting State in which it exists and in compliance with the laws of that State, however if the beneficiary is the beneficial owner of the interest, the tax so paid shall not exceed 10% of the gross sum of the interest.(Article 11 of the Double Taxation Agreement).

    Capital gain derived by a foregin resident in Bangladesh

    Gains obtained by a resident of a Contracting State from the alienation of immovable property referred to in Article 6 and situated in the other Contracting State may be taxed in that other Contracting State. (Article 13 to prevent a double taxation agreement, Procedure of foreign investment in Bangladesh)

    Foreign Investment In Bangladesh-Formal Sectors In Bangladesh

    Repatriation of investment in Bangladesh – Foreign Investment Law in Bangladesh

    Full restitution of the capital accumulated from foreign sources is permitted. Likewise, the gains and dividends accrued on foreign investment can be transferred in full.

    If foreign investors reinvest their repatriable dividends and/or retained profits, they will be considered as new assets. Foreigners living in Bangladesh are required to pay up to 75% of their wages and will benefit from complete repatriation of their savings and retirement benefits.

    In order to allow full repatriation of the capital invested, benefit and dividend, foreign investors will have to apply for repatriation approval from the Bangladesh Bank through an approved bank. 

    Foreign Private Investment (Promotion and Protection) Act, 1980, section 8 also states:

    (1)  In respect of foreign private investment, the transfer of capital and the returns from it and, in the event of liquidation of industrial undertaking having such investment, of the proceeds from such liquidation is guaranteed.

    (2)  The guarantee under sub-section (1) shall be subject to the right which, in circumstances of exceptional financial and economic difficulties, the Government may exercise in accordance with the applicable laws and regulations in such circumstances.

    Foreign Investment In Bangladesh_Best Law Firm For Fdi And Visa_Tahmidur Rahman

     

    List of online portals for potential investors in Bangladesh (Procedure of foreign investment in Bangladesh)

    Foreign direct investment (FDI)

     

    www.bida.gov.bd

    BIDA
    Investing in economic zoneswww.beza.gov.bd BEZA
    Trade-related Informationhttps://www.bangladeshtradeportal.gov.bd/Bangladesh Government
    Company name Clearance

    http://app.roc.gov.bd:7781/psp/nc_ search?p_user_id=

     

    Office of the Registrar of Joint Stock Companies and Farm (RJSC)

     

    Registration of Companyhttp://www.roc.gov.bd/

    Office of the Registrar of Joint Stock Companies and Farm (RJSC)

     

    VAT Registrationhttp://www.nbr.gov.bd/

    National Board of Revenue

     

    Issuance of Certificate for using standard mark

    http://www.bsti.gov.bd/Form_Online.html

    Bangladesh Standards and Testing Institution (BSTI)

     

    Foreign Investment In Bangladesh_All The Priority Sectors For Foreign Investment In Bangladesh

    Elimination of Taxation treaty in Bangladesh

     

    In double taxation the following shall be eliminated:

     

    (a) If a resident of China receives income from Bangladesh, the amount of tax on that income payable in Bangladesh in compliance with the terms of this Agreement may be credited against the Chinese tax levied on that resident.

     

    However, the amount of the credit shall not exceed the amount of Chinese tax on that income determined in accordance with China’s tax laws and regulations.

     

    (b) where the revenue received from Bangladesh is a dividend paid by a company resident in Bangladesh to a company resident in China and holding not less than 10 per cent of the shares of the company paying the dividend, the credit shall take into account the tax paid to Bangladesh by the company paying the dividend for its revenue.

     

    Bilateral Investment treaties in Bangladesh

    Bangladesh has with many nations, including China, signed Bilateral Investment Treaties (BIT) and Trade Agreements (TA). Typical provisions contained in BITs are clauses on foreign investment protection and treatment standards which usually address issues such as fair and equal treatment, full protection and security.

    Provisions on reimbursement for damages suffered by foreign investors as a result of expropriation or as a result of war and dispute are typically a central part of such agreements as well. Most IIAs also control the moving of funds across borders in connection with the Procedure of foreign investment in Bangladesh.

    The BITs also contain a clause on dispute resolution between investor and state. Usually this allows investors the right to bring a lawsuit to an international arbitral tribunal if a dispute occurs with the host country (Procedure of foreign investment in Bangladesh).

    The International Center for Settlement of Investment Disputes (ICSID), the United Nations Commission on International Trade Law ( UNCITRAL) and the International Chamber of Commerce (ICC) are common places in which arbitration is sought.

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    Funding options for foreign investors in Bangladesh

    Foreign entities can conveniently access funding for short- and long-term investments from local financial institutions, including working capital loans, syndication, and trade finance. In addition, some of the Foreign Institutions (FIs) at home and abroad have access to on-shore and off-shore funding.

    There are currently 58 planned commercial banks in the financial sector, as well as a host of Non-Bank Financial Institutions (NBFIs) and specialized financial institutions.
    In addition to raising debt-based funding, investors may also consider securing equity-based capital-market financing from the country.

    Raising Capital from the Equity market in regards to the Procedure of foreign investment in Bangladesh

    International companies can start raising capital from the stock market, subject to fulfillment of certain terms and conditions. The government is keen to increase the number of companies listed on the local stock exchange, and offers regulatory incentives to attract profitable businesses and facilitate the Procedure of foreign investment in Bangladesh.

    Listed firms pay 25 per cent corporate taxes on non-listed entities, excluding those markets, compared with 35 per cent tax limit.
    Formal approval from the Bangladesh Securities and Exchange Commission (BSEC) is required for the fundraising process. Companies may use either the fixed price, or the option of constructing books.

    The appointed merchant bank and auditor help prepare a prospectus under the fixed-price process, valuing the business based on current assets and prospects for future growth. The indicative stock price is determined and has to be certified by the regulator.

    The method of book building involves a designated merchant bank to prepare an indicatively priced prospectus. The contending business then holds a series of road shows in which institutional investors are invited to bid on their stocks. IPO share price is dependent on input from other institutional investors and their interests. 

    The DSEX listing process has the mandatory requirement that an Issue Manager be employed or named (approved by the DSEX). The way IPOs are determined needs support from the approved Issue Manager.

    The draft prospectus shall be prepared in compliance with the Regulations of an Issue Manager and the Securities and Exchange Commission (Public Issue for the Procedure of foreign investment in Bangladesh ), 2015. IPOs can be issued by either book building or fixed-price system.

    Debt capital from local commercial Banks in Bangladesh

    International investors have access to financing for the local debt. Trade finance, term loans, and working capital are readily accessible to large foreign investors, in particular.

    Interest rates are low for such loans and between 9-16 per cent. Bangladesh has a very large number of  State and commercial banks (as stated in the preceding section), and bank loans can be obtained against collateral secured in regards to the Procedure of foreign investment in Bangladesh.

    Private Foreign Commercial borrowing in Bangladesh

    To secure long-term foreign currency loans, a request must be sent to BIDA, which will then be forwarded to the Central Bank for further review.
    To secure the loans, a business case supporting the loan condition must be included in the application. The proposal, along with the business case, is submitted for evaluation and decision by a committee chaired by the Bangladesh Bank Governor including members from BIDA, PMO Ministry of Finance.

    Foreign Investment In Bangladesh_Tahmidur Rahman _Best Law Firm In Dhaka

    Regulatory institutions facilitating investment in Bangladesh

    The investment route depends on the business sector and on the FDI policy introduced by the Government of Bangladesh. The following government and trade agencies would oversee and encourage investment in most sectors;

    The Bangladesh Investment Development Authority (BIDA), Formerly known as the Investment Board (BOI), has been set up to deal with local and foreign investment issues. All incoming investments must be pre-approved by BIDA.

    The regulatory body aims to encourage domestic and foreign investment by simplifying the bureaucratic complexities of entering the Bangladesh market in regards to the Procedure of foreign investment in Bangladesh. 

    Bangladesh Bank ( BB) is the central bank of the country. The central bank must be officially informed of any foreign transactions, including equity investments made on the stock market. All incoming investments shall be reported to BB via commercial banks.

    Relevant trade bodies and chambers in Bangladesh

    The Dhaka Chamber of Commerce and Industry (DCCI) is a non-profit, service-oriented chamber serving as the first point of contact for small and medium-sized enterprises. DCCI offers market-oriented inputs to imports , exports and investments throughout the government’s policy formulation period for the Procedure of foreign investment in Bangladesh.

    The Chamber periodically publishes guidebooks to promote trade and investment. DCCI also has its own training facility to facilitate the growth of capability of professionals associated with member organizations.

    The International Investment Chamber of Commerce and Industries (FICCI), founded in 1963, is made up of 188 members across the mining, service and manufacturing sectors. Classified as Class ‘A’ Chamber of Commerce, FCCI is affiliated with the FBCCI, the International Trade Center (Geneva) and the World Trade Organization (Paris).

    The Metropolitan Chamber of Commerce and Industry (MCCI) is a leading chamber body made up of representatives of major local and multinational corporations. The MCCI maintains frequent ties with major international trade organizations and global private sector organizations. (procedure of foreign investment in Bangladesh)

    Exit policy for foreign investors in Bangladesh

    An investor can terminate an investment either by a decision of an annual or an extraordinary general meeting. Once a foreign investor has completed the formalities to leave the country, he or she can repatriate the net proceeds after obtaining proper authorisation from the central bank (Bangladesh Bank, Procedure of foreign investment in Bangladesh).

    Foreign Investment In Bangladesh_Tahmidur Rahman_Top Law Firm In Bangladesh

    Frequently Asked Questions about Foreign Investment in Bangladesh

    In regards to Foreign Investment in bangladesh people also ask these questions frequently, hence this FAQ content block is dedicated to answering your questions.

    General Questions about Foreign Investment in bangladesh

    Which Countries invest the most in Bangladesh?

    The country’s major investors are China, South Korea , India, Egypt, the United Kingdom , the United Arab Emirates and Malaysia. According to the most recent data available from Bangladesh Bank, FDI flows increased by 5.36% to USD 1.65 billion in July-October 2019 per year. -Procedure of foreign investment in Bangladesh

    How is the Investment Scenario in Bangladesh in 2020?

    Bangladesh is already recognized as a thriving investment hub, reflected in influxes of foreign direct investment ( FDI) from the region. Bangladesh ‘s FDI amounted to USD 2.58 billion at the end of June 2018.

    According to the Bangladesh Investment Development Authority (BIDA), there was a 13.34% rise in FDI in the third quarter of 2018, with proposals worth USD 3.23 billion in the basket. Mega-projects by the government is seen as the primary explanation for significant FDI investments in  Transportation, transportation , and communications. Exports from the country are also growing amid domestic consumption.

    What is an example of Foreign Direct Investment in Bangladesh?

    Examples of foreign direct investment in Bangladesh include, but are not limited to, mergers, acquisitions, retail, utilities, logistics, and development. Foreign direct investment and the laws that regulate it can be critical to the growth strategy of a business.

    What are the types of foreign Investment?

    Examples of foreign direct investment in Bangladesh include, but are not limited to, mergers, acquisitions, retail, utilities, logistics, and development. Foreign direct investment and the laws that regulate it can be critical to the growth strategy of a business.

    What is the current trend of foreign investment in Bangladesh?

    35.4 per cent of the FDI came from the manufacturing industry in 2016-17. The country witnessed phenomenal Y-o – Y growth of 11 per cent 2017 In this area. Experts in industry are optimistic this development will be maintained in the years to come. The sectors of transport , storage and communications ranked second with FDI inflows of 25 per cent.

    This may be due to the mega projects being initiated and executed by the government at the present time. Over the time, electricity, accompanied by gas and petroleum, attracted FDI of 19 per cent. Over the years, the power sector has steadily drawn foreign investments due to the Government ‘s attractive tax incentives. (Procedure of foreign investment in Bangladesh)

    How Foreign investors can enter into Bangladeshi Market?

    Foreign investors may either form a wholly / partially owned subsidiary, or set up a branch or liaison office for Bangladesh operations. The type of organization that was created will rely on the medium- and long-term strategy of the investor for market penetration. Hence the three conventional ways of entering the Market in Bangladesh:

    • Wholly owned subsidiaries
    • Limited liability by purchasing shares in an existing Bangladeshi company
    • Joint ventures
    How to get work permit and visa as a foreign investor in Bangladesh?

    For investors planning to become resident in Bangladesh by taking a full-time position or for the company’s expatriate employee, branch office, liaison office, work permit is required.

    Upon arrival in Bangladesh for a short period of time under two types of visa, the person is required to apply for a work permit with BIDA and an extension from the Passport and Visa Department, subject to effective completion of the security clearance.

    If not treated skillfully, the process can be very hectic, and time consuming. We help our customer make it easy and hassle-free. We also help our client locate commercial addresses needed for trade license and clearance of protection.

    How to open a Liaison or Branch office in Bangladesh?

    Opening Liaison office requires some critical preparatory work and documentation work which requires experience. We have significant experience of getting BIDA  registration for both liaison and branch office for several foreign principals.

    Legal documentation involves authentication of parent company’s Memorandum and Articles of Association, list of directors etc. Often the authentication process is cumbersome.

    We try our best to make the process smooth and hustle free. In recent time we have opened several branch and liaison offices for construction and engineering companies whose principal is located in Italy, UK, China, Singapore and other neighboring countries.

    What is SEZ or Special Economic Zone in Bangladesh?

    In Bangladesh, economic zone is a relatively new term. The government intended to establish 100 economic zones in various geographical locations.

    However, as the land is still under development process, only a handful of economic zones are currently allocating property, or will do so in the near future. Mirsarai Economic Zone for example.

    Our customer can take our service from the Bangladesh Economic Zones Authority (BEZA) to conduct due diligence on land in the economic zone. We also provide legal due diligence services for lands adjacent to the Mirsarai Economic Zone which is ready for immediate investment

    How to get permits and consents as a foreign investor in Bangladesh?

    Often the client carries out due diligence on the number of permits and approval necessary and the time period. The type of permits and consent required depends largely on the type of industry, the business venture, its location and the planned Bangladesh activity.

    The Chambers offers all basic licensing services such as business registration, liaison office approval, branch office approval, trade authorization, export and import permit, chamber and trade membership, work permit, bank account opening, IRC, ERC, ad hoc IRC, BIDA registration, BIDA recommendation, etc.

    We can help with other licenses or permits. We either do it ourselves or outsource it from our established service providers and vendors

    What is EPZ or Export Processing Zone in Bangladesh?

    Export Processing Zone is ideal for wholly owned export-oriented companies, if it is a Joint Venture, etc. 08 (eight) EPZs are geographically diversified in various locations within Bangladesh.

    Depending on the nature of the company, availability of utilities, rental rates, transportation, availability of qualified man power, etc. Customer may choose acceptable EPZ to invest.

    Interested customers can take advantage of our services to locate, lease, or move existing land leases from Bangladesh Export Processing Zone Authority (BEPZA).

    How to do share acquisitions as a foreign investor in Bangladesh?

    Share acquisition requires many paperwork works in an unlisted private and public corporation, e.g. signing Form 117, affidavits etc. In addition, in conjunction with the Memorandum and Articles of Association, several resolutions are required along with the drafting of the Share Purchase Agreements.

    For the whole process, we counsel clients so that the transition is done smoothly. We also recommended buyer as well as seller to take over some businesses. We have also advised individual shareholder in the purchasing and sale of shares. Our service involves not only supporting documentation work, but also helping to actually record and receive a certified copy from RJSC

    Foreign Direct Investment in Bangladesh at CLP:

    The Barristers, Advocates, and lawyers at CLP in Gulshan, Dhaka, Bangladesh are highly experienced at dealing with foregin direct investment, where we assist clients in setting up of the complete business irrespective of whether it is within a specialized zone or any other part of Bangladesh. In Counsels Law Partners, our experience helps us to efficiently execute local and cross-border global transactions while helping you at all stages of the process and offering you cost-effective, realistic business solutions. In addition to handling various issues related to domestic clients on a regular basis, it also has experience in consulting and assisting numerous international clients with utmost care and attention throughout their legal exploration in Bangladesh. For queries or legal assistance in regards to the Procedure of foreign investment in Bangladesh, please reach us at:

     E-mail:[email protected]
    Phone:+8801727983838

    Address: House 39, Road 126 (3rd Floor) Islam Mansion, Gulshan 1, Dhaka.

     

    Have a Different Question?

    Email us anytime : [email protected]

    Or call — +8801727983838

    Tahmidur Rahman | Law Firm in Dhaka

    Affiliated with Counsels Law Partners, A full service multi-directional law firm in Dhaka.

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