Registration of a Private Limited Company in Bangladesh in 2022Meheruba Mahbub Senior Associate, Counsels Law Partners24 Jan 2022This article will explain in details about formation and registration of a Private Limited Company in Bangladesh. It will focus on...
Registration of a Private Limited Company in Bangladesh in 2022
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
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.
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.
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.
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.
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.
“Tahmidur Rahman – Counsels Law Partners is considered as one of the leading corporate firms in Dhaka, Bangladesh”
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What are some alternative ways to set up a company in Bangladesh?
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.
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.
“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.”
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]
Address: Jamilla Villa (4th Floor Flat No-C2 House 4/A/1 Road no: 2 Dhaka 1212
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
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).
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.
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
Job Title: Barrister and Senior Associate
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