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Foreign Direct Investment: How to register a company in Bangladesh

  • Published at 12:46 am December 19th, 2018
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According to economists, stakeholders, and regulators, Bangladesh has been able to attract the increasing amount of FDI thanks to consistent policy support from the government

Bangladesh’s openness to foreign investment, competitive labor costs, and rapid economic growth are rapidly turning it into one of the most promising markets in the world. 

Data by the Bangladesh Bank (BB) shows that the country received $961 million in the fiscal year 2008-09, while FDI inflow increased to $2.54 billion in FY16-17.

Bangladesh received $2.60 billion worth of foreign investment from July to May in FY17-18, according to the latest data of BB.

According to economists, stakeholders, and regulators, Bangladesh has been able to attract the increasing amount of FDI thanks to consistent policy support from the government.

Emerhub—full-service market entry firm that aims to ease brands to enter and expand in South East Asia—created a guideline to help foreign investors know what legal entities are available in Bangladesh.

Types of legal entities in Bangladesh

Limited liability companies: Limited liability companies (LLC)—a company where liability is limited to shareholders’ shared capital—make up a large number of companies in Bangladesh. LLCs in Bangladesh can be fully foreign-owned.

Any person who is above the age of 18 is eligible to register an LLC . 

Additionally, Bangladeshi law prescribes a minimum of two and a maximum of 50 shareholders, along with two directors. 

However, it is possible to form a joint venture with a local entity to share strengths and lessen risks.

Public limited company

A public limited company (PLC) can invite the public to hold shares to raise funds from them, and is usually registered on a stock exchange.

A PLC has a minimum of seven members, three directors, without any maximum number of shareholders. Its shareholders can be any legal person or any individual who is above the age of 18.

In addition to the Companies Act 1994, it should also comply with the Securities and Exchange Commission Act 1993.

Source:EMERHUB

Step-by-step process of company registration

Name clearance: The first step to registering a company in Bangladesh is to get approval of the company’s name from the Registrar of Joint Stock Companies and Firms (RJSC).

Drafting of required documents:Next, the Article of Association (AoA) and Memorandum of Association (MoA) need to be drafted. Other forms must also be prepared while drafting these, as per the requirements for compliance to RJSC.

Opening a bank account: The third step is to open a bank account in the proposed name of the company and make an inward remittance of at least $50,000 if the company will be hiring foreign employees.

Submitting documents to RJSC: The next step is to submit all the required papers to RJSC and pay the registration fees. The incorporation certificate can also be requested from the RJSC at this point.

Post-registration compliance: Upon receiving the certificate of incorporation, AoA, and MoA, the company will need to proceed to some additional licences and registrations including: Trade Licence, Tax Identification Number (TIN), VAT Registration Certificate, Fire Certificate, and the Environmental Clearance Certificate (if necessary).

The average estimated time-line of completing all registration procedures in Bangladesh is 45-60 days.

Alternatives to setting up a company

Branch: A branch is an extension of its parent company, as opposed to a separately incorporated entity, making the parent company responsible for its branch’s liabilities.

A branch can engage in commercial activities, given the approval of Bangladesh Investment Development Authority(BIDA). However, the Exchange Control Guidelines will strictly monitor its operations.

The average establishment time of a branch in Bangladesh is 45-60 days.

Representative/liaison office: Similar to a branch, a liaison—also called a representative office—is subject to BIDA’s approval.

Its activities are limited since it only serves as a communication or coordination instrument of the foreign parent company’s business resources in Bangladesh.

Additionally, a liaison office cannot earn any local income in Bangladesh. The parent company shoulders all of its expenses and operational costs through remittance.

There also cannot be outward remittances of any kind from Bangladeshi resources, except the amount brought in from abroad. The liaison office follows the same general process of business registration in Bangladesh.

Franchise operation with local promoters

Foreign-owned companies can also enter into franchises in Bangladesh. A franchise can permit local promoters to use the franchiser’s brand, provide them with technical support, and charge fees or commission on their activity.