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 is not required to include the word “limited” in its name. However, prior to the formation of such companies, permission from the government is required, which can be a time-consuming and complicated process. Before granting such permission, the government is also authorized to insert additional clauses and conditions into the Association’s Memorandum and Articles of Association and to impose restrictions on the same.
Non-Governmental Organizations (NGO) and International Non-Governmental Organizations (INGO) are typically non-profit organizations and sometimes international organizations that are autonomous and independent of governments and are active in humanitarian, educational, health care, public policy, social, human rights, environmental, and other areas to effect change in accordance with their objectives.
Comparative Analysis of Entities Under Sections 29 and 28 of the 1994 Companies Act:
The “non-profit association” or Club may be registered under the Companies Act of 1994. Both types of companies (i.e. “association not-for-profit”) shall enjoy all of the advantages of a limited liability company and be subject to all of its obligations. Both types of businesses are registered as Limited by Guarantee Companies. Company Limited by Guarantee refers to a company that may not have a share capital and whose members promise to pay the company’s debts up to a predetermined limit in the event of liquidation.
The primary distinction between an entity under section 29 of the Companies Act of 1994 and an entity under section 28 of the Companies Act of 1994 is that the former is a profitable organization while the latter is a non-profit organization. As the promoters of the entity chose according to their convenience, i.e. whether they wished to form a profitable or non-profit entity, there is no general advantage or disadvantage associated with their registration.
However, the “association not-for-profit” can be established without the word “Limited” On the basis of their formation, there are no specific tax benefits for either type of company; however, if an entity under section 28 is formed solely for religious or charitable purposes, it may be eligible for tax exemption under certain heads under the Income Tax Ordinance of 1984.
Comparing entities under Section 29 of the Companies Act of 1994 and Societies Registration Act of 1860:
Entities governed by the Societies Registration Act of 1860. Can only be Charitable societies, societies established for the promotion of science, literature, or the fine arts, the foundation or maintenance of libraries, etc., i.e. charitable in nature, as per section 20 of the Act, whereas the entity under section 29 of the Companies Act 1994 can engage in any type of business as defined in the object clause of the entity and is profitable in nature.
On the basis of their formation, neither type of entity is eligible for specific tax benefits; however, if an entity formed under the Societies Registration Act, 1860 is formed solely for religious or charitable purposes, it may be eligible for tax exemption under certain heads under the Income Tax Ordinance, 1984.
i. The option and possibilities of converting an entity from Section 29 of the Companies Act 1994 to Section 28 of the Companies Act 1994 or to an entity under the Societies Registration Act, 1860 are discussed below:
ii. Convert to a “non-profit association” under Section 28 of the Companies Act:
There are no explicit rules and regulations governing the conversion of a section 29 company to a section 28 company.
In practice, however, the Registrar of the Joint Stock for Companies & Firms has the discretion to convert the exiting entity, i.e. an entity under section 29 of the Act, into an association under section 28 of the Act, if the Registrar is satisfied that the conversion is to be made for promoting commerce, art, science, religion, charity, or any other useful object, and that the entity intends to use its profits or other income to promote these objects. In addition, the Registrar will decide on the conversion request after receiving the clearance report from the security agencies. Nonetheless, it should be noted that the section 28 procedure for the dissolution of a corporation is entirely bureaucratic, time-consuming, and uncertain.
iii. Become a society under the Societies Registration Act of 1860:
A Company formed under section 29 of the Companies Act 1994 cannot be converted into a society.
By passing a special resolution and appointing a liquidator, a section 29-registered entity can dissolve voluntarily from its current registration format. The applicant may then submit an application to form a society under the Societies Registration Act of 1860.
The procedure for registering a non-profit organization is identical to that of a public limited company. This association is governed by Section 28 of the Companies Act of 1994, as detailed in the following section.
Authority to Waive Limited In the name of nonprofit and other organizations:
(1) Where it is proved to the satisfaction of the Government that an association capable of being formed as a limited company has been or is about to be formed for the purpose of promoting commerce, art, science, religion, charity, or any other useful object, and applies or intends to apply its profits, if any, or other income in promoting its objects and to prohibit the payment of any dividend to its members, the Government may, by license with the approval of one of its Secretaries, direct the association to apply its profits, if
(2) A license granted by the government under this section may be subject to such conditions and restrictions as the government deems appropriate. These conditions and restrictions are binding on the association and, if directed by the government, must be included in the association’s memorandum and articles or one of those documents.
(3) Upon registration, the association shall enjoy all the privileges and be subject to all the obligations of a limited company, with the exception of using the word “Limited” as part of its name, publishing its name, and sending member lists to the Registrar.
(4) A license issued pursuant to this section may be revoked at any time by the Government. Upon revocation, the Registrar shall add the word “Limited” to the end of the association’s name on the register, and the association shall no longer enjoy the exemptions and privileges granted by this section.
Before a license is revoked, the government must notify the association in writing of its intention and the reasons for the revocation, and the association must be given the opportunity to submit an objection to the cancellation.”
To learn more about the timeline and registration process for your Non-Profit Organization, please visit our page on registering a Public Limited Company.
Registration of companies in Bangladesh:
This guide provides a comprehensive overview of the requirements, process, and timeline for registering a limited liability company in Bangladesh. Bangladesh, like most other jurisdictions, has a set of initial and ongoing regulatory compliance requirements for the establishment and operation of businesses.
When considering the registration of a new company or the relocation of an existing one to Bangladesh, keep in mind that the majority of Bangladeshi businesses are registered as limited liability companies (commonly known as private limited companies). Note that there is a provision for One-Person Companies (OPC in short). Due to certain restrictions, we do not recommend that our clients form an OPC. In Bangladesh, a private limited company is a separate legal entity, and shareholders’ liability for the company’s debts is limited to the amount of capital they have contributed. According to the Companies Act of 1994, any individual over the age of 18 may register a company in Bangladesh, regardless of nationality.
If you are an international investor, you should read our article on international investment. It will assist you in comprehending the legal framework governing foreign investment in Bangladesh.
PRE-REGISTRATION: IMPORTANT INFORMATION
KEY FACTS ABOUT COMPANY FORMATION
Company Title Prior to incorporating a business in Bangladesh, the name must be approved (cleared).
Directors. Minimum of two directors are required. Directors can be either domestic or international. Directors must be at least 18 years old and cannot have been declared bankrupt or convicted of misconduct in the past. The law stipulates that a director must hold the qualifying shares specified in the Articles of Association. A shareholder that is not a natural person (i.e., a corporation) may nominate a director.
A Bangladeshi limited liability company can have between two and fifty shareholders. A director and shareholder may or may not be the same individual. A shareholder may be a person or another legal entity, such as a corporation. In most industries, 100% foreign or domestic ownership is permissible. After the Bangladeshi company has completed the incorporation process, new shares may be issued or existing shares may be transferred to another party at any time.
Authorized Funds. The authorized capital must be stated in the Memorandum of Association and Articles of Association. It is the maximum amount of authorized share capital that can be issued (allocated) to shareholders. A portion of the authorized capital may be held in reserve. In Bangladesh, there is no minimum or maximum limit on authorized capital.
Paid-up Capital. The minimum paid-up capital required to register a Bangladeshi company is 1 Taka. Paid-up capital (also known as share capital) can be increased at any time following a company’s incorporation.
Registered Location. To register a company in Bangladesh, you must provide a local address for the company’s registered office. The registered address must be a physical address (residential or commercial) and cannot be a Post Office Box.
Constitution and Articles of Incorporation. The corporation-to-be must draft a memorandum of association (MoA) and articles of incorporation (AoA).
CONSIDERATIONS FOR FOREIGNERS:
Foreigners who wish to establish a business in Bangladesh must consider the following points.
You must open a bank account in the name of the proposed company after obtaining name clearance from the Registrar of Joint Stock Companies and Firms (RJSC), also known as the registrar of companies, and deposit the initial paid-up capital. This is required for Bangladeshi company incorporation.
All company incorporation procedures can be completed without your presence in Bangladesh. The only possible exception is opening a bank account, depending on the bank chosen.
All directors and shareholders may be foreign nationals.
If you only wish to incorporate a limited liability company in Bangladesh and have no intention of relocating there, you are not required to obtain a special visa. You are free to operate your business from abroad and to visit Bangladesh on a business visa whenever necessary to attend to company-related matters.
If you intend to establish a business in Bangladesh, you are required to obtain a work permit.
The company registrar requires the following information for the incorporation of a company in Bangladesh:
- Company Title A name clearance is necessary.
- Articles of Association and Memorandum of Association. RJSC stipulates that the MoA’s object clause must not exceed 400 words and seven clauses.
- Shareholder Information (National ID if the shareholder is a Bangladeshi)
- Director Specifics (including Tax Identification Number)
- Address provided on Form IX and Subscriber Page. A scanned copy in pdf format must be provided.
- For foreigners: Copy of shareholder and director’s passports
Bangladesh’s company registration process is partially computerized.
There are three distinct steps involved in establishing a company in Bangladesh: a) Name Clearance; ii) Opening a bank account and depositing paid-up capital; and b) Company Registration. Step ii is applicable only if the proposed company has a foreign shareholder.
FIRST STEP: NAME CLEARANCE
To establish a company in Bangladesh, you must first obtain name approval for the proposed company name. You must first visit www.roc.gov.bd and generate a username. Then you can submit an application for name clearance. After submitting the name clearance application, you will receive a bank payment slip and be required to pay Taka 600 to the designated bank. After making the payment, you must log in to your account on the RJSC’s website to receive the name clearance.
The RJSC has prepared this guide for name clearance.
Internet Explorer and Mozilla Firefox are recommended web browsers for use on the RJSC website. Other browsers may not function properly.
Improve your chances of name approval by ensuring that the name:
is not identical or too similar to any existing local business names; does not violate any trademarks; is not obscene or vulgar; and is not reserved.
A name that has been approved will be reserved for six months after the date of clearance. You can extend the name by filing a request for extension just prior to the expiration date.
Second step: opening a bank account and depositing the initial capital.
This step is applicable only if the proposed company has foreign ownership.
Next, you must open a bank account in the proposed company name with any Bangladeshi scheduled bank. After opening the account, you will be required to deposit funds equal to the number of shares the foreign shareholder from outside Bangladesh will hold. The Bank will issue an Encashment Certificate, which RJSC will need in order to incorporate.
STEP 3: REGISTER BUSINESS
The final step is to submit all of the necessary information on the RJSC website. Additionally, you must upload Form IX and Subscriber Page. After completing all of the necessary steps, you will receive a bank payment slip for paying the registration fees and stamp duty.
You can review this RJSC-created guide for submitting all information to the RJSC website.
After completing the transaction at the bank, you are finished. You must now follow up with the RJSC in order to obtain the incorporation certificate. Officials from the RJSC will review the documents and information. If they are satisfied, they will issue the digitally signed Certificate of Incorporation, Memorandum of Association and Articles of Association, and Form XII. These documents will be sent to your RJSC account’s associated email address.
In extremely rare instances, the incorporation process may be delayed if the shareholders or directors are of a particular nationality. In such situations, authorities may request additional information.
DOCUMENTS ISSUED BY RJSC:
- Certificate of Incorporation: The RJSC will issue the company’s Certificate of Incorporation. The certificate will include the company’s registration number, name, and incorporation date.
- Form XII: Form XII includes the list of directors for a corporation.
- Official copies of the MoA and AoA.
You will almost certainly also need the following items to register your Bangladeshi company:
- Certificates of ownership for each shareholder.
- Register investors, stocks, directors, etc.
- Company seal for the organization
- A rubber stamp for the organization APPLYING FOR TRADE LICENSE, TAX ID, AND OTHER LICENSES.
After incorporating, you should purchase or rent a commercial space in any commercial area.
Then you must apply for a Business License and an Employer Identification Number. Depending on the business activities of your company, you may be required to obtain additional business licenses.
RETURN FILING REQUIREMENTS
Annual Return: An Annual General Meeting must be held each year. The annual meeting must be held within 18 months of the company’s incorporation, and no more than 15 months may pass between AGMs.
In the event of a change in the board of directors, the shareholding structure, or any other change, a return must be filed with the RJSC within a specified time frame.
Are you intending to do an Association formation in Bangladesh?
The legal team of Tahmidur Rahman, The Law Firm in Bangladesh: TLS, The Law Firm in Bangladesh are highly experienced in providing all kinds of services related to Association formation in Bangladesh. For queries or legal assistance, please reach us at:
E-mail: [email protected]
Phone: +8801847220062 or +8801779127165 or +8801708080817
Address: House 410, Road 29, Mohakhali DOHS