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, The Law Firm in Bangladesh

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:

  • 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.

     

     

    Best Law Firm In Dhaka

     

    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.

     

    Best Corporate Law Firm In Dhaka

    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.
    How To Form A Private Limited Company In Bangladesh_Best Corporate Law Firm In Dhaka

    If you want to open a liaison office in Bangladesh or about branch formation click here!

    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.

     

    “Tahmidur Rahman – The Law Firm in Bangladesh is considered as one of the leading corporate firms in Dhaka, Bangladesh”

    BDLaw Firms Bangladesh

    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 Remura: The Law Firm in Bangladesh:

    The legal team of Tahmidur Rahman, The Law Firm in Bangladesh Remura: The Law Firm in Bangladesh 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: +8801847220062 or +8801779127165

    Address: House 410, Road 29, Mohakhali DOHS

     

    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).

    Infographics
    How To Form A Private Limited Company In Bangladesh_Best Corporate Law Firm In Bangladesh
    Video Tutorial
    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 — +8801847220062 or +8801779127165

    Mediation In Bangladesh

    Mediation in Bangladesh

    Mediation in Bangladesh: A Complete OverviewBarrister Remura MahbubDirector, Tahmidur Remura TLS, Law Firm in Bangladesh12 Nov 2022The purpose of this article is to explain the entire process of mediation in Bangladesh: provisions that regulate mediation, step...

    Joint Ventures In Bangladesh

    Joint Ventures in Bangladesh

    Joint Ventures in Bangladesh: Types, Formation, and AgreementsBarrister Remura MahbubDirector, Tahmidur Remura TLS, Law Firm in Bangladesh10 Nov 2022The purpose of this article is to provide an in-depth overview of joint ventures (JV) in Bangldesh: types of...

    Vat Agent In Bangladesh

    VAT agent in Bangladesh

    When and why is a VAT agent required in Bangladesh? A non-resident entity that conducts business in Bangladesh but does not have a fixed place of business must appoint a VAT Agent in Bangladesh, according to the Value Added Tax and Supplementary Duty Act, 2012, and...

    Mediation in Bangladesh

    Mediation in Bangladesh: A Complete OverviewBarrister Remura MahbubDirector, Tahmidur Remura TLS, Law Firm in Bangladesh12 Nov 2022The purpose of this article is to explain the entire process of mediation in Bangladesh: provisions that regulate mediation, step...

    Joint Ventures in Bangladesh

    Joint Ventures in Bangladesh: Types, Formation, and AgreementsBarrister Remura MahbubDirector, Tahmidur Remura TLS, Law Firm in Bangladesh10 Nov 2022The purpose of this article is to provide an in-depth overview of joint ventures (JV) in Bangldesh: types of...

    VAT registration and enlistment in Bangladesh

    VAT registration and enlistment in Bangladesh Every company in the country must have a unique Business Identification Number (BIN). A business must first obtain a VAT registration certificate before applying for a BIN. The annual turnover of a business determines...

    VAT agent in Bangladesh

    When and why is a VAT agent required in Bangladesh? A non-resident entity that conducts business in Bangladesh but does not have a fixed place of business must appoint a VAT Agent in Bangladesh, according to the Value Added Tax and Supplementary Duty Act, 2012, and...

    Warisan and Succession Certificate in Bangladesh

    Warisan and Succession Certificate in Bangladesh Warisan and Succession Certificate in Bangladesh is a vital document used to identify the heirs or successors of a deceased person. The Warisan Certificate is issued by the Ward Councilor's Office in the City...

    How to get a Portugal Passport from Bangladesh

    Portugal Passport By Investment The three most common routes to Portuguese citizenship for expats are outlined below. 1. Portuguese Passport By means of Marriage: After three years of marriage to a Portuguese citizen, one can acquire Portuguese citizenship through...

    PI Visa for foreign investor in Bangladesh

    PI Visa for foreign investor in Bangladesh • In order to apply for a work permit, foreign investors and employees must hold a PI (private investor) or E2/E3 (employment) VISA. • BIDA issues a letter of recommendation for obtaining a PI and E2/E3 VISA. • VoAs may be...

    A complete guide on Franchise Business Registration in Bangladesh

    Bangladesh is the seventh largest consumer of goods and services in the world. In Bangladesh, franchising is an established method for launching a business. The industries of transportation, beauty, fast food, education, wellness, mail delivery, clothing, and health...

    How to form an Association in Bangladesh

    How to form an Association in Bangladesh abd Section 28 of the 1994 Companies Act: Under section 28 of the Companies Act, a nonprofit organization may incorporate as a corporation. This Association will enjoy all the advantages of a limited liability company, but it...

    F-1 Student Visa from Bangladesh

    F-1 Student Visa from Bangladesh: The most common visa for students wishing to study in the United States is the F-1 student visa. It is a temporary visa for foreign students who wish to study at an accredited school or college in the United States. The United States...
    Mergers and Acquisitions process | How to efficiently acquire in simple steps in 2022

    Mergers and Acquisitions process | How to efficiently acquire in simple steps in 2022

    Mergers and Acquisitions in Bangladesh – Efficient steps in 2022 – M&A Process

    Tahmidgoldenpicturebackground E1569742859700

    Tahmidur Rahman
     Director and Senior Associate, TR Barristers in Bangladesh

    27 Dec 2019

    Updated in Jan 9, 2022

    Our clients profit from a leading global M&A practice that has worked on more M&A transactions than any other law firm over the last 2 years. In TR Barristers in Bangladesh, 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. This post explains in details about the mergers and acquisitions process in Bangladesh.

    What are Mergers and Acquisitions? 

     

    Mergers and acquisitions ( M&A) refer to transactions which are combined in some way between two entities. While the use of mergers and acquisitions ( M&A) is synonymous, they come with different legal symbolic meanings. Two similar-size businesses unite in a merger to form a new corporate company.

    On the other hand, an acquisition is when a larger enterprise acquires a smaller enterprise, thereby absorbing the smaller business. M&A transactions can be friendly or aggressive, depending on the board approval of the target firm. (Mergers and Acquisitions in Bangladesh)

    Types of Mergers and Acquisitions (M&A) Transactions

     

    1.  Horizontal M&A

    A horizontal merger occurs between two firms operating in related industries which may or may not be direct competitors.

    2. Vertical M&A

    A vertical merger takes place in the supply chain between a business and its supplier or a client. The business intends to shift up or down the supply chain, thus consolidating its role in the market.

    3. Conglomerate M&A

    This form of transaction is typically performed in different industries for purposes of diversification, and is between businesses.

    Legal Framework of a  Mergers and Acquisitions (M&A) Transactions in Bangladesh

     

    Bangladesh does not have a specific or a single piece of legislation dealing solely with mergers and acquisitions. Instead there are various statutes and by-laws in Bangladesh that govern acquisitions and mergers.

    The main laws are the Companies Act 1994, the Securities and Exchange Ordinance of 1969, the Bangladesh Securities and Exchange Commission Act of 1993, the Foreign Exchange Management Act of 1947, the Competition Act and the By-Laws rendered under those Statutes. Additionally , there are various rules that deal with particular aspects of mergers and acquisitions. For example,the Insurance Act 2010 for insurance companies and the Bangladesh Telecommunication Regulation Act 2001 for the telecommunication sector.

    Mergers And Acquisitions In Bangladesh_Best Law Firm In Bangladesh

    Step by Step process for Mergers and Acquisitions  in Bangladesh

     

    While contemplating game changing strategic transactions, companies regularly seek Counsel Law Partners to plan, negotiate and close their deals. As an integrated team, the mergers and acquisitions lawyers from our law firm work through the broad spectrum of practice areas involved in strategic M&A transactions.

    Our mergers and acquisitions lawyers are committed to attaining the ambitions of our clients and offering innovative ideas and industry-focused legal advice. And here are the conventional steps by steps procedure of a mergers and acquisitions in Bangladesh:

     

    Step 1: Proposal of a Merger

    Any company proposing to carry out merger first have to get suitable resolutions passed by their Board of Directors. By passing the resolution, the Board of Directors will agree in principle, to proceed in accordance with such resolution.

    During the planning stage of the merger, key executives in both merging entities’ supply chain should create dedicated integration, project management office, and steering committee teams with specific job descriptions, meeting cadence, and coordinated deliverables and status updates templates.

    A timely, detailed organizational viewpoint can be introduced into a phase of M&A integration where there is a collective participation of the supply chain leadership.

    This partnership becomes possible at all levels of the organizations work together during the integration process; however, the position of the operations and production staff varies depending on the phase.

    The resolution passed may be treated as Price-sensitive Information (i.e. the information if published is likely to materially affect the price of securities of the company).

    Step 2: Negotiations

    After producing some of the target company’s valuation models, the acquirer should have sufficient information to allow him to ensure a fair offer; once the initial offer has been made, the two companies will discuss terms in more detail

    Step 3: Due-Dilligence for the Merger

    To enable Bangladesh Bank to consider the effectiveness of merger, the transferee company have to seek prior approval to commence financial and legal due-diligence of itself and also of that company they are intending to merge with.

    Due diligence is a systematic procedure that starts when the offer is accepted; due diligence seeks to validate or correct the acquirer ‘s estimation of the target company’s worth by conducting a thorough evaluation and examination of any aspect of the target company’s operations – its financial results, assets and liabilities, clients, human resources, etc.

    In order to seek the approval for due diligence the transferee company need to submit certain documents.

    Documents:

    1. Credentials of the company (background, resources, net worth etc.) and
    2. Information about the team of Lawyers, Financial Advisors, Chartered Accountants, Valuers etc. for conducting due-diligence of the asset and liability of both the companies.

      The transferee company have to ensure that none of the team members engaged in due diligence are actively dealing in shares or have any conflict of interest with either of the companies intending to merge together.

    “Tahmidur Rahman Remura Parnters is Considered as one of the leading firms in M&A Law in Dhaka, Bangladesh”

    Carpe Noctem Bangladesh

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

    Step 4: Disclosure and Confidentiality

    a)Disclosure

    Disclosure plans are an important part of any agreement involving merger or acquisition (M&A), and it is no exception in Mergers and Acquisitions in Bangladesh. The disclosure schedules include details provided by the acquisition agreement — typically a list of relevant contracts, intellectual property, employee records, and other specific matters, as well as exceptions or conditions to the selling company’s comprehensive representations and warranties in the acquisition agreement.

    An incorrect or incomplete disclosure plan may result in the selling company or its stockholders being infringed by the purchase agreement and potentially serious liability. Whenever a person/company intends to own, acquire or control 10% or more voting shares in a company listed on any stock exchange in Bangladesh, there is a mandatory obligation of disclosure.  Meaning, both the companies are under an obligation to disclose information about the companies among themselves.

    b)Confidentiality

    However, there is also an obligation of confidentiality as well. Upon obtaining approval from Bangladesh Bank for conducting due-diligence, the transferee company shall submit an undertaking to Bangladesh Bank.

    Such an undertaking confirms that all information, in particular all non-public domain information and documents etc. shall be kept strictly confidential. In addition, such confidential information shall not be disclosed to any person or organization unless advised by Bangladesh Bank or legally required or required to comply with the regulatory requirements. However, this confidentiality requirement does not apply for the due diligence team.

     In Mergers and Acquisitions in Bangladesh, it is to be noted that the members of the due-diligence team will also be bound under the aforesaid undertaking to keep the information, document etc. confidential. In addition, the due-diligence team shall not demand any information/observations made by Bangladesh Bank in relation to the affairs and the business of concerned companies from the transferee or transferor companies.

    Mergers And Acquisitions In Bangladesh _Best Law Firm In Dhaka

    Step 5: Due diligence report submission

    Upon completion of the task of due diligence, the team will have to submit a copy of the report to Bangladesh Bank. (Mergers and Acquisitions in Bangladesh)

    The due diligence report must include the following information:

     

    • Debts that are secured and unsecured and in the case of secured debts particulars of the securities and their value.
    • The value of the property and the assets of the transferor and the transferee company calculated.
    • The seller’s M&A counsel also should endeavor to limit disclosures to lists of documents or matters rather than descriptions of the contents of documents or matters (such as requiring a list of pending litigation rather than a description of each pending lawsuit); again, this approach lessens the work involved in preparing the disclosure schedules.
    • The liabilities of the transferor and the transferee companies.
    • In view of the above clauses, the financial impact of the merger proposal on the two companies and their creditors, shareholders and depositors.

    Step 6: Shareholders’ and creditors’ consent

    The next step would be to prepare a scheme of merger by the transferor or transferee companies based on the due diligence report. The Board of Directors of the respective companies will have to pass a resolution in this regard.

    While passing the resolution the scheme shall be considered as so drawn and then, in accordance to the provisions of Companies Act -1994, hold meetings of their respective members to consider and approve, the concerned scheme.

    If a majority in number representing three-fourth in value of members present in the meeting, either in person or by proxy, approve the scheme, the same shall be deemed to have the approval of the members.

    Mergers And Acquisitions In Bangladesh _Tahmidur Rahman

    Step 7: Scheme Submission to Bangladesh Bank

    Thereafter, an application will have to be submitted to Bangladesh bank by the transferee company.  In addition to the application, a copy of the Scheme of merger/amalgamation, together with such other documents will have to be submitted.

    Other documents include:

    1. Name, address and occupation of the Directors of the transferee company as proposed to be reconstituted after the amalgamation
    2. Details of the proposed Chief Executive Officer of the transferee company after the amalgamation.
    3. Post-merger Branch Plan, Technology Plan, Human Resource Plan and proposal to address Corporate Governance issues.

      Information relevant for consideration of the scheme and the swap ratio including the following:

    • Valuer Report explaining the method of valuation and the justification for it. If market value of shares has been considered in computation of swap ratio, the value so considered,
    • Last three years annual report of each of the companies,
    • Financial results, if any, published by companies covering the periods subsequent to the Annual reports
    • Significant anticipated changes in service and products.
    • Pro forma combined balance sheet of the transferee company as it will appear following the amalgamation,

      Computation based on pro forma balance sheets of the following items:

    • Tier I Capital
    • Tier II Capital
    • Risk weighted assets
    • Gross and net Non-Performing Loans
    • Ratio of tier I capital to risk weighted assets
    • Ratio of tier II capital to risk weighted assets
    • Ratio of tier I capital to total assets
    • Ratio of total capital to risk weighted assets
    • Ratio of gross and net NPLs to advances.

      Any other information or explanation as sought by Bangladesh Bank.

    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
    Mergers And Acquisitions In Bangladesh _Top Law Firm In Bangladesh

    Step 8: Draft Scheme Examination

    After receiving the draft Scheme, Bangladesh Bank will satisfy itself that the Scheme as proposed by the transferee company can be implemented successfully. In deciding such, Bangladesh Bank will consider various factors through examination of the scheme. The factors that may be considered are the capital of the merged entity, valuation of assets and liabilities, the impact on the profitability etc.

    Step 9: Assets and liabilities valuation 

    It is upon the merging companies to mutually agree the valuation of the assets. Bangladesh Bank does not generally interfere in this regard except where there are reasons to believe that the valuation is not fair and reasonable. If mutual agreement is not possible in relation to certain items then any of the parties to the merger can seek advice of Bangladesh Bank.

    The Bangladesh Bank plays the role of a mediator and help resolve the differences. In case the mediation fails, the Bangladesh Bank will decide the value and the decision of the Bank in this regard shall be binding. The cost of obtaining such advice will be borne by the transferor company.

    In a case where mutual agreement has not been possible in relation to certain items for example:

    (a) valuation of a particular asset
    (b) classification of any advance
    (c) determination of any liability or any like issue, the bank / financial institution, shall highlight those areas and seek advice of Bangladesh Bank.

    Mergers And Acquisitions In Bangladesh_Best Commercial Law Firm In Bangladesh

    Step 10: Transaction Price in Mergers and Acquisitions in Bangladesh

     Again the transaction cost/price is a matter to be mutually agreed between the transferor and the transferee on the basis of fair valuation of assets and liabilities proposed to be transferred.

    Parties have the option to fix the price at a premium or discount to valuation. However, Bangladesh Bank have a right to be satisfied that the mutually agreed price is fair and reasonable. 

    For this purpose, Bangladesh bank may ask for pricing rationale to examine the same and accept or suggest alteration. In order to do so Bangladesh bank will seek explanatory note on price mechanism along with supporting documents.

    Step 11: Bangladesh Bank approval in Mergers and Acquisitions 

    At this stage, Bangladesh bank will approve the Scheme as proposed if two conditions are satisfied. It can be implemented:

    • to the benefit of the company and/or the financial system of the country and
    • the scheme is not detrimental to the interest of the depositors

    Thereafter, Bangladesh Bank may give its approval to the said Scheme with or without such modifications as deemed necessary.

    Mergers And Acquisitions In Bangladesh _Best Corporate Law Firm In Bangladesh

    Step 12: High court petition in regards to Mergers and Acquisitions in Bangladesh

    After the scheme of merger/amalgamation has been permitted by Bangladesh Bank, the transferor and the transferee now must comply with other formalities required under the Companies Act 1994. As such they need to file an application before the High Court and submit the scheme for the merger/amalgamation.

    In addition, the transferee company will mark a copy of the application as filed before the Court together with annexure, if any, to Bangladesh Bank and will keep the Bank informed from time to time as the progress in the matter.

    If the company, after obtaining approval of the Scheme from the Bangladesh Bank, fails to take these steps within the next three months from the date of approval, the approval so granted lapses, unless otherwise extended on justifiable consideration.

    The high court will hear the application for merger/amalgamation and considering the objections if any, raised by any of the stakeholders. As such, based on that the Court may with or without such modification as it deems fit approve the Scheme.

    Step 13: File certified copy of High court order to RJSC

    After the scheme of merger/amalgamation has been permitted by Bangladesh Bank, the transferor and the transferee now must comply with other formalities required under the Companies Act 1994. As such they need to file an application before the High Court and submit the scheme for the merger/amalgamation.

    In addition, the transferee company will mark a copy of the application as filed before the Court together with annexure, if any, to Bangladesh Bank and will keep the Bank informed from time to time as the progress in the matter.

    If the company, after obtaining approval of the Scheme from the Bangladesh Bank, fails to take these steps within the next three months from the date of approval, the approval so granted lapses, unless otherwise extended on justifiable consideration.

    The high court will hear the application for merger/amalgamation and considering the objections if any, raised by any of the stakeholders. As such, based on that the Court may with or without such modification as it deems fit approve the Scheme. (Mergers and Acquisitions in Bangladesh)

    Mergers And Acquisitions In Bangladesh

    Frequently Asked Questions about Mergers and Acquisitions in bangladesh

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

    General Questions about Mergers and Acquisitions in bangladesh

    What sort of Experience does Tahmidur Rahman & TLS have in regards to Mergers and Acquisitions in Bangladesh?

    •Public company takeover bids and responses;

    •Private company acquisitions and disposals;

    •Joint ventures;

    •Reorganisations including schemes of arrangement;

    •Venture capital and private equity;

    •Management buyouts; and

    •Share buybacks and capital reductions

    Is there any compulsory conversion from Private to Public companies in Bangladesh

    According to the Bangladesh Regulation, a private company has to turn itself into a public company when due to an acquisition in the form of either an issue of new shares or some other restructuring of a private company’s paid-up capital is going beyond BDT 40 crore (unlisted, with seven shareholders).

    If the paid-up capital of the company goes beyond BDT 50 crore, the company must then, by public offering, list itself on the stock exchange.

    However, the Bangladesh Securities and Exchange Commission can decide, by stipulating an exemption period, to waive this requirement. In addition, for joint ventures and 100 percent foreign-owned firms, these provisions have now been exempted.

    Are there any restrictions of share transfer in Bangladesh?

    Shares are freely transferable in a private or public company in Bangladesh. However, by its articles of association, any transfer of shares by a shareholder in a private limited company may be prohibited. It must comply with the company’s articles of association in order for any transfer of shares to be legitimate.

    Transfers can be refused by the board of directors of a public corporation only on restricted grounds, citing ‘sufficient cause,’ which has also been interpreted by the courts as implying non-compliance with legal requirements. It is also prevalent for private companies to include in their charters the pre-emption privileges given to shareholders.

    Is foreign ownership of companies allowed in Bangladesh?

    While Bangladesh has a controlled marketplace economy, foreign ownership, with the exception of certain licensed sectors such as freight forwarding, logistics, banking and insurance, is permitted in almost all sectors. In order to allow licenses to operate in sectors after incorporation, the limited sectors have a maximum foreign shareholding threshold.

    Furthermore, there are a variety of other industries in which both local and international investors monitor private investment.

    How to acquire a public company by acquisition of shares in Bangladesh?

    An acquisition of shares may take place either through subscribing to a company’s future earnings growth or through buying existing equity from another shareholder in the venture. For mergers and acquisitions, by filing its most recent annual report, the company must keep up to date. Any transfer of shares must be registered at the Joint Stock Companies Registrar’s Office. (In 2019, the previous requirement to receive approval from the Bangladesh Security Exchange Commission for the issue of shares resulting in a particular threshold being crossed by the paid-up capital of non-listed companies was abolished.)

    How amalgamation of companies work through a High court order in Bangladesh?

    Following a court order, the target entity merges into the purchasing entity and the target is then disbanded. Both of the target company’s assets and liabilities vest in the buyer. Purchase compensation is paid to the owners of the target company by the purchaser, either by allocating shares or by paying cash for the value of their shares. Mergers under the head of amalgamations are primarily regulated by the Companies Act 1994. Such amalgamations are expected to be approved by the High Courts of Bangladesh. Following the approval of the amalgamation by the court and upon approval by at least 75% of the shareholders, the transferee may offer 21 days’ notice to acquire the shares. The transferee company can acquire the shares unless the opposing shareholders have otherwise applied to the court within 30 days of receipt of the notice. A appeal to the appropriate High Court for orders to convene meetings of shareholders and creditors to obtain their approval must be made for a merger. A majority representing 75 percent of the value of the shareholders and creditors present and voting at the meetings must approve the scheme. A petition must subsequently be filed with the High Courts requesting approval of the scheme.

    What is the process of demerger in Bangladesh?

    The object of this arrangement is to prevent tax inefficiencies resulting from a slump in revenue or an itemized selling of assets. Under a court order, the target company’s undertaking or division is de-merged from the target and then passed to the buyer. All of the undertaking’s assets and liabilities then vest in the buyer. The target company’s shareholders are either given shares in the purchaser or paid in cash. The target organization, unlike a merger, will continue to exist. It is important to follow the same procedure as with a merger.

    How slump sale works in M&A of Bangladesh?

    A slump selling is the sale of an undertaking for tax purposes, or, more generally, the sale of an undertaking as a continuing concern, where the undertaking of the target undertaking is sold through a court-sanctioned scheme along with its assets and liabilities.

    As compared to assigning values to individual properties, the contract can contain the obligation to pay consideration in the form of a lump sum. However, if connected to liabilities, such a transaction will also require approval from the High Court’s original corporate jurisdiction.

    How acquisition of assets is done in Bangladesh?

    The Sale of Goods Act 1930 regulates purchases of movables. The Companies Act describes shares and debentures as movable assets and sets out the transfer process for them. Immovable property acquisitions are limited by the Transfer of Property Act 1882.

    The different aspects of the sale are protected by these laws, such as the pre-requisites for legal transactions, the rights and responsibilities of the seller and the buyer, the implied conditions and assurances, the transfer of title and the danger of the properties.
    The cost of transactions plays an important role in structuring the way assets are obtained and the recording of asset transfers. These expenses include stamp duty and taxes such as income tax and capital gains. No registration is required for the selling of movable assets, but the sale of immovable assets must be registered with the Office of the Sub-Registrar.

    Joint Ventures in M&A of Bangladesh

    Where a wholly owned company is not the preferred choice for an investor, a joint venture could be conducted for a foreign entity seeking to reach those industries with foreign equity ceilings, for example, as a joint venture (for example, aviation, pharmaceuticals, and garment manufacturing).
    In other industries, considerations such as the pre-established marketing and distribution chain of the local partner and the availability of human capital play an important role in opting for a joint venture from a new entrant’s perspective.

    The acquisition of a stake after the commissioning of the project helps to prevent multiple construction issues and risks in major projects requiring a lengthy and sometimes arduous development process.

    Why we are considered as one of the best M&A law firms in Bangladesh?

    At Tahmidur Rahman & TLS, we combine our transactional skills with specialist experience across a number of fields to advise our clients on M&A transactions, including employment, tax benefits, financial services, regulatory services, real estate, intellectual property and business. Given the often rapid speed of transactions, we appreciate the need to provide expert advice efficiently and expeditiously.

    Our sector teams work closely with our transaction lawyers to offer a streamlined service to clients. Good knowledge of the market, gained from many years of working with clients across our industries, enables us to bring a strategic approach to our work and a comprehensive understanding of the issues of the industry.

    How many types of Mergers are there?

    There are three types of Mergers in Bangladesh.

    The three main types of mergers are horizontal mergers that increase market share, vertical mergers that exploit existing synergies and concentric mergers that expand the product offering.

    Why sometimes Mergers fail?

    •Mislead Investment Value – Investments on assets may look good on paper, but they may not be revenue-generating areas after the deal has been concluded.

    •Lack of clarity in the integration process – post-merger, disintegration of factors such as key employees, processes, major projects, policies, etc., leading to failure in the implementation process.

    •Mismatch in culture – If the M&A agreement fails to develop a strong strategy focused on the difference in the cultural aspects of the two companies, a low productivity of the employees of both companies is observed.

    What happens to the Stocks after the Merger?

    Companies in stock-for-stock mergers agree to exchange shares on the basis of a fixed ratio. For example, if companies X and Y agree to a 1-for-2 share merger, Y shareholders will receive one X share for each of the two shares they currently hold. Y shares will cease trading and the number of outstanding X shares will increase after the merger has been completed. The post-merger X share price will depend on the market assessment of future earnings prospects for the new entity.

    What is a reverse Merger?

    A reverse merger occurs when a public company — usually a shell company with limited operations — acquires a private company that secures access to capital markets without having to go through an expensive initial public offering process.
    Shareholders and managers of the acquired company exchange their shares for a controlling interest in the public company, hence the terms “reverse merger” or “reverse acquisition.”

    What happens to the Cash-for stock after the Merger?

    In the case of cash mergers or acquisitions, the acquiring company agrees to pay a certain dollar amount for each share of the shares of the target company. The target’s share price would rise to reflect the takeover bid. For example, if Company X agrees to pay 100 BDT for each share of Company Y, the share price of Y would increase to about 100 BDT to reflect the offer.

    The price could rise even further if additional companies were interested in acquiring Y. However, the price of the X share could initially fall if investors are unconvinced about the strategic value of the merger. After the companies merge, Y shareholders will receive 100 BDT for each share they hold and Y shares will cease trading.

    How long does a Mergers and Acquisitions normally take in Bangladesh?

    Mergers and Acquisitions may take a long time to market, negotiate and close. Most mergers and acquisitions can take a long time from start-up to completion; a period of 3 to 6 months is not unusual.

    What are the advantages of doing Mergers and Acquisitions?

    1. Mergers and acquisitions can come with various tax advantages

    2. New possibilities offered by a new market

    3. Obtaining easier access to a skilled labor force

    4. You can diversify your portfolio

    5. Buying or merging with another company is usually cheaper

    6. Better access to a larger market

    7. Mergers and acquisitions can mean greater financial power and more influence

    What is the largest Mergers and Acquisitions deal in the history?

    Vodafone and Mannesmann. This merger, which took place in 2000, was worth over $180 billion and is the largest merger and acquisition deal in history.

    What Tahmidur Rahman & TLS Lawyers will do in a M&A?

    •Negotiate and draft agreements – this will be done in conjunction with the client, the business that is being purchased or sold, other consultants and any financial institutions.

    •Carry out due diligence – this is an investigation to verify the accuracy of the information passed from the seller to the purchaser. It sets out the financial strength of the company; the complete ownership of all assets; whether there are outstanding debts or other claims against the company; any environmental or other liabilities that could reduce the value of the business in the future.

    • Arrange financing – this could come from banks or other types of investors; they would like to have some kind of investment security. e.g. participation in the shareholding, taking out a mortgage over property or other collateral.

    •Gather all parties to complete the transaction, ensuring that all assets have been properly covered by written documents that are properly signed and documented. Company law requires decisions to be taken at properly convened board meetings and recorded in written resolutions.
    • Finalize all registrations and procedures after completion.

    How are Mergers Financed?

    Mergers do get generally financed by Exchanging stocks. This is the most common way to fund a merger or acquisition. If a company wishes to acquire or merge with another company, it must be assumed that the company has a large stock and a solid balance sheet. Here, the buyer will receive more stock from the seller than if they had paid in cash.

    Mergers and Acquisitions in Bangladesh, M&A at TLS:

    The Barristers, Advocates, and lawyers at TLS in Gulshan, Dhaka, Bangladesh are highly experienced at dealing with Mergers and Acquisitions, In TR Barristers in Bangladesh, 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 troubles.  For queries or legal assistance, please reach us at:

     E-mail:[email protected]
    Phone:+8801847220062 or +8801779127165

    House 410, Road 29, Mohakhali DOHS

     

    Have a Different Question?

    Email us anytime : [email protected]

    Or call — +8801847220062 or +8801779127165

    Tahmidur Rahman | Law Firm in Dhaka

    Affiliated with TR Barristers in Bangladesh, A full service multi-directional law firm in Dhaka.

    © 2018-2020 Tahmidur Rahman Matte IT Ltd.

    NEED HELP?

    Privacy Policy
    Disclaimer
    Client Login
    Sitemap

    Call us!

    /* home and contact page javasccript */ /* articles page javasccript */