Legal Framework for Repatriation of Disinvestment Proceeds and Outward Share Transfer
| Step | Governing Authority / Document | Relevant Section / Clause |
|---|---|---|
| Initial Investment Approval | Bangladesh Bank / BIDA | Foreign Exchange Regulation Act, 1947, Section 18; Investment Policy of Bangladesh |
| Share Transfer / Disinvestment Approval | Bangladesh Bank | Foreign Exchange Regulation Act, 1947, Section 18; Bangladesh Bank's Foreign Exchange Guidelines |
| Repatriation of Proceeds | Authorized Dealer (AD) Bank / Bangladesh Bank | Foreign Exchange Regulation Act, 1947, Section 5, 18; Bangladesh Bank's Foreign Exchange Guidelines, Chapter 9 |
| Tax Clearance | National Board of Revenue (NBR) | Income Tax Act, 2023, Section 107 (for capital gains) |
| Company Dissolution (if applicable) | Registrar of Joint Stock Companies and Firms (RJSC) | Companies Act, 1994, Sections 300-337 |
- Decision to Disinvest/Transfer Shares: The foreign investor decides to sell their shares or disinvest from the Bangladeshi entity. This typically involves identifying a buyer (local or foreign).
- Board Resolution: The board of directors of the Bangladeshi company must pass a resolution approving the share transfer or disinvestment.
- Share Transfer Agreement/Deed: A formal agreement or deed of transfer is executed between the seller (foreign investor) and the buyer, detailing the terms of the sale, share price, and other relevant conditions.
- Application to Bangladesh Bank (through AD Bank): The foreign investor, through an Authorized Dealer (AD) bank in Bangladesh, must apply to Bangladesh Bank for approval of the share transfer and subsequent repatriation of proceeds. This application should include:
- A copy of the share transfer agreement/deed.
- Board resolution of the company.
- Proof of original investment (e.g., encashment certificate of foreign currency, share subscription money).
- Valuation report of shares (if required by Bangladesh Bank, especially for unlisted companies).
- Audited financial statements of the company.
- Any other documents as required by Bangladesh Bank or the AD bank.
Reference: Foreign Exchange Regulation Act, 1947, Section 18; Bangladesh Bank's Foreign Exchange Guidelines, Chapter 9.
- Tax Clearance Certificate: Before repatriation, the foreign investor must obtain a Tax Clearance Certificate from the National Board of Revenue (NBR), confirming that all applicable taxes, including capital gains tax on the sale of shares, have been paid. The capital gains tax rate for non-resident individuals and companies is generally 15% on the gains arising from the transfer of shares of a Bangladeshi company.
Reference: Income Tax Act, 2023, Section 107.
- Repatriation of Funds: Once Bangladesh Bank's approval and the Tax Clearance Certificate are obtained, the AD bank can process the outward remittance of the disinvestment proceeds to the foreign investor's overseas account. The AD bank will verify all documents and ensure compliance with foreign exchange regulations.
Reference: Foreign Exchange Regulation Act, 1947, Section 5; Bangladesh Bank's Foreign Exchange Guidelines, Chapter 9.
- Update RJSC Records (if applicable): If the share transfer results in a change in the company's shareholding structure, the company must update its records with the Registrar of Joint Stock Companies and Firms (RJSC) by filing the necessary forms (e.g., Form 11A for transfer of shares).
Reference: Companies Act, 1994, Section 36.
Consult LegalBD for Expert Guidance
Navigating the complexities of foreign exchange regulations and repatriation procedures requires expert legal assistance. Our team at LegalBD can provide comprehensive support to ensure a smooth and compliant process for your disinvestment and outward share transfer.
Schedule a Scoping SessionFrequently Asked Questions
What is the primary law governing foreign exchange transactions and repatriation in Bangladesh?
The primary law governing foreign exchange transactions and repatriation in Bangladesh is the Foreign Exchange Regulation Act, 1947. This Act, particularly Section 18, empowers Bangladesh Bank to regulate all foreign exchange dealings, including the repatriation of disinvestment proceeds.
Is a Tax Clearance Certificate mandatory for repatriating disinvestment proceeds?
Yes, a Tax Clearance Certificate from the National Board of Revenue (NBR) is mandatory before repatriating disinvestment proceeds. This certificate confirms that all applicable taxes, including capital gains tax on the sale of shares, have been paid, as per Section 107 of the Income Tax Act, 2023.
Which authority approves the outward share transfer and repatriation of funds?
Bangladesh Bank is the primary authority that approves the outward share transfer and the subsequent repatriation of funds. Applications are typically submitted through an Authorized Dealer (AD) bank in Bangladesh, as guided by the Foreign Exchange Regulation Act, 1947, and Bangladesh Bank's Foreign Exchange Guidelines.
Are there any restrictions on the amount that can be repatriated?
Generally, foreign investors are entitled to repatriate the full amount of their disinvestment proceeds, provided all regulatory requirements, including tax obligations and Bangladesh Bank approvals, are met. There are no specific statutory limits on the amount itself, but the process is subject to verification of the original investment and the sale transaction by Bangladesh Bank under the Foreign Exchange Regulation Act, 1947.
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