Legal Framework for M&A Due Diligence
Core Statutory Checklist
| Compliance Area | Primary Statute | Key Regulatory Authority |
|---|---|---|
| Corporate Authority | Companies Act 1994 | Registrar of Joint Stock Companies & Firms (RJSC) |
| Foreign Investment | Foreign Exchange Regulation Act 1947 | Bangladesh Bank (Central Bank) |
| Tax Liability | Income Tax Act 2023 | National Board of Revenue (NBR) |
| Labor Compliance | Bangladesh Labour Act 2006 | DIFE / Labour Court |
| Environmental | Bangladesh Environment Conservation Act 1995 | Department of Environment (DoE) |
The Due Diligence Process Roadmap
Critical Red Flags in Bangladesh Jurisdictions
- Undisclosed Liabilities: Failure to file annual returns under Section 81 and 85 of the Companies Act 1994 often indicates systemic governance failure.
- Land Title Defects: In Bangladesh, land ownership must be verified via the Baya Deeds and the latest Khatian (Record of Rights). Any discrepancy in the chain of title is a high-risk red flag.
- Non-Compliance with Section 18: Under the Foreign Exchange Regulation Act 1947, any transfer of shares to a non-resident requires reporting to Bangladesh Bank. Failure to comply can lead to the freezing of dividend repatriations.
- Gratuity and Provident Fund Arrears: Non-payment of statutory benefits under Sections 232-250 of the Bangladesh Labour Act 2006 creates massive hidden liabilities.
- Tax Contingencies: Pending assessments or appeals under the Income Tax Act 2023 must be covered by robust indemnity clauses in the Share Purchase Agreement (SPA).
Consult Barrister Liton Asaduzzaman Sarkar
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Schedule a ConsultationFrequently Asked Questions
Is Bangladesh Bank approval required for share transfers to foreigners?
Under Section 18 of the Foreign Exchange Regulation Act 1947, while prior approval is generally not required for most sectors, the transfer must be reported to Bangladesh Bank through an Authorized Dealer (AD) bank within 14 days of the transfer to ensure legal repatriation of future dividends.
What is the statutory limit for filing annual returns at RJSC?
Pursuant to Section 81 of the Companies Act 1994, every company must hold an Annual General Meeting (AGM) once every calendar year, and under Section 190, the annual return must be filed within 30 days of the AGM.
How are tax liabilities handled during an acquisition?
Under the Income Tax Act 2023, the purchaser may be held liable as a 'representative assessee' for the seller's unpaid taxes if proper tax clearance certificates are not obtained. We recommend obtaining a certificate under the relevant provisions of the Act to mitigate successor liability.
◆ Related Statutory Guides & Practice Insights
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<a href="/en/foreign-direct-investment-fdi-and-bida-registration/" style="color:#C5A059; font-weight:600; text-decoration:none; font-size:14px; display:inline-block; transition:color 0.2s;">• Foreign Direct Investment (FDI) and BIDA Registration</a>
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<a href="/en/bsec-corporate-governance-code-for-listed-companies/" style="color:#C5A059; font-weight:600; text-decoration:none; font-size:14px; display:inline-block; transition:color 0.2s;">• BSEC Corporate Governance Code for Listed Companies</a>
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<a href="/en/right-to-information-rti-act-in-bangladesh-filing/" style="color:#C5A059; font-weight:600; text-decoration:none; font-size:14px; display:inline-block; transition:color 0.2s;">• Right to Information (RTI) Act in Bangladesh: Filing Form-Ka, Government Official Deadlines & Information Commission Appeals</a>
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<a href="/en/directors-in-bangladesh-companies-fiduciary-duties-appointment-removal-liabilities/" style="color:#C5A059; font-weight:600; text-decoration:none; font-size:14px; display:inline-block; transition:color 0.2s;">• Company Directors in Bangladesh: Duties, Appointment & Removal</a>
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