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Holding and Subsidiary Companies in Bangladesh – Everything you need to know in 2023

Barrister Tahmidur Rahman
Director, The Law Firm in Bangladesh

24 Jan 2022

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This article will explain in details about Holding and Subsidiary Companies in Bangladesh and how can you start your business in Bangladesh.

 

Types of Companies in Bangladesh

There are six ways of doing business in Bangladesh:

In general, these are the six types of business entities can be found in Bangladesh

In simplest way: How you can incorporate Holding and Subsidiary Companies in Bangladesh

Holding and Subsidiary Companies in Bangladesh

When a company has control over another company and it holds the majority of the shares of another company, it is known as a holding company. And the company which is controlled by the first mentioned the company is known as a subsidiary company. Under the provision of Companies Act, 1994,

“a company shall be deemed to be the holding company of another if and only if that other is its subsidiary.”

So, the following characteristics of a holding company may be found-

  • It has the controlling power over another company;
  • It holds more than 50% shares of that other company;
  • It has more than 50% voting power;
  • The holding company is directly of indirectly empowered to
  • appoint directors of that other company.

Subsidiary company:

On satisfying any or more of the following conditions, a company shall be deemed to be a subsidiary company:

(1) Controlling the composition of board of directors:

If the composition of board of directors of a company is controlled byanother company, then the company whose board of directors is controlledshall be deemed to be a subsidiary company. [sec. 2 (2) (a)]

The composition of board of directors is said to be controlled when any director of the subsidiary company is removed or appointed by the parent company without the consent of any other person of the said subsidiary Company.

Holding And Subsidiary Companies In Bangladesh_Best Law Firm In Bangladesh

(2) Controlling voting securities:

A company shall be a subsidiary of another company if more than 50% of the voting securities are directly or in directly controlled, held or owned or managed in any other ways by another (holding) company.

(3) Subsidiary of another subsidiary company:

A company shall also be deemed to be a subsidiary of another company if it is a subsidiary of any company which is that other company’s subsidiary.

For Example: Company B is a subsidiary of company A, and company C is a subsidiary of company B. So, company C is a subsidiary of company ‘A’ also. If company ‘D’ is a subsidiary, then ‘D’ will be regarded as subsidiary of company ‘B’ also, and consequently of company ‘A’ also.

Other Companies alongside Holding and Subsidiary Companies in Bangladesh in Bangladesh:

(a) Existing Company:

Existing company indicates the company formed and registered at or before the commencement of the Companies Act, 1994. Before passing this Act, the companies were regulated under the Companies Act, 1913 .

However, under the provision of present Companies Act, 1994 “Existing Company” means a company formed and registered under any law relating to companies in force at any time before the commencement of this Act, and is in operation after commencement of this Act. 

(b) Foreign Company:

Generally, a foreign company is a company which is incorporated outside Bangladesh. But under section 378, a foreign company may include company incorporated outside Bangladesh, but has an established place of business in Bangladesh.

Holding And Subsidiary Companies In Bangladesh_Best Law Firm In Bd

Setting up a Subsidiary Company in Bangladesh

 

In the event that you go it alone and establish a Bangladesh subsidiary, you’ll need to think carefully about the best organizational structure and geographical location for your business. Private Limited Company is the most common business structure because it shields the parent company from legal responsibility for the actions of its subsidiaries.

Once a building type has been selected, a site must be selected. Countries, states, or even counties can have their own sets of rules and norms by which they conduct business. Consider these criteria as you make your final decision on a suitable location for your company.

The following are the stages of establishing a Holding and Subsidiary Companies in Bangladesh:

  • The Registrar of Joint Stock Companies and Firms website allows you to check your name and print a clearance certificate.
  • Getting Your Company’s Articles of Incorporation and Memorandum of Incorporation
  • To obtain encashment certificates and finalize your registration, you must first open a bank account in Bangladesh.
  • Since the banking system in Bangladesh wasn’t built to handle international business transactions, companies there often face difficulties when trying to do business there. Acquiring encashment certificates is a necessary step in the registration process because they serve as evidence that foreign currency was converted to Bangladeshi Taka. In a stroke of good fortune for expanding businesses, Bangladesh is currently modernizing its banking systems.
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If you want to open a liaison office in Bangladesh or about branch formation click here!

“Tahmidur Rahman – The Law Firm in Bangladesh 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?

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.

 

Foreign Investment In Bangladedsh

“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: TLS: The Law Firm in Bangladesh:

The legal team of Tahmidur Rahman, The Law Firm in Bangladesh Remura: TLS, 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
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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

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