Establishing a Company in Bangladesh: A Comprehensive Investor's Guide

Introduction to Company Formation in Bangladesh

Bangladesh, with its robust economic growth and strategic geographical location, presents a compelling destination for foreign direct investment (FDI). Establishing a company here requires a clear understanding of the legal framework and procedural requirements. This guide, authored by Barrister Liton Asaduzzaman Sarkar, provides an authoritative and precise overview, citing relevant Bangladeshi statutes to assist investors in navigating the process seamlessly.

Choosing the Right Legal Structure

The choice of legal structure is paramount and depends on your business objectives, capital investment, and liability preferences. The most common forms for foreign investors are:

1. Private Limited Company: This is the most popular choice, offering limited liability to its shareholders. It requires a minimum of two and a maximum of fifty shareholders. Shares are not offered to the public, and transferability is restricted.
2. Public Limited Company: Suitable for larger enterprises intending to raise capital from the public. It requires a minimum of seven shareholders and offers shares to the public.
3. Branch Office: Allows foreign companies to operate in Bangladesh without forming a separate legal entity. Activities are restricted to those specified in the approval.
4. Liaison/Representative Office: Primarily for promotional and liaison activities, not allowed to undertake commercial operations or earn revenue in Bangladesh.
5. Partnership Firm: Governed by the Partnership Act, 1932. Requires a minimum of two and a maximum of twenty partners. Partners have unlimited liability.
6. Sole Proprietorship: Suitable for small businesses with a single owner, who bears unlimited liability.

For most foreign investors, a Private Limited Company is the preferred vehicle due to its limited liability protection and flexibility.

Key Regulatory Bodies and Their Roles

• Registrar of Joint Stock Companies and Firms (RJSC): The primary authority for company registration and compliance. All companies must be registered with the RJSC under the Companies Act, 1994.
• Bangladesh Investment Development Authority (BIDA): The apex investment promotion agency. BIDA facilitates foreign investment, provides one-stop services, and offers various incentives. Approval from BIDA is crucial for foreign investment.
• Bangladesh Bank (BB): The central bank, responsible for regulating foreign exchange transactions under the Foreign Exchange Regulation Act, 1947.
• National Board of Revenue (NBR): Handles taxation matters, including income tax, VAT, and customs duties.

Step-by-Step Company Registration Process for a Private Limited Company

Step 1: Name Clearance from RJSC

Before proceeding with registration, you must obtain name clearance for your proposed company from the RJSC. This ensures that the chosen name is unique and not offensive. The application is submitted online through the RJSC portal. The clearance is typically valid for 30 days, extendable upon request.

Step 2: Opening a Temporary Bank Account (for Foreign Investors)

Foreign investors need to open a temporary bank account in Bangladesh in the proposed company's name. This account will be used to remit the initial paid-up capital from abroad. A 'No Objection Certificate' (NOC) from BIDA might be required by some banks, though often a letter of intent from the directors suffices.

Step 3: Remittance of Paid-up Capital

The foreign shareholders must remit their share of the paid-up capital to the temporary bank account. The bank will issue an Encashment Certificate, which is a crucial document for RJSC registration and BIDA registration.

Step 4: Preparation and Submission of Registration Documents to RJSC

The following documents are prepared and submitted to the RJSC:

• Memorandum of Association (MoA): Defines the company's objectives and scope of activities.
• Articles of Association (AoA): Outlines the internal rules and regulations governing the company's operations and management.
• Form I: Declaration of Registration.
• Form VI: Notice of situation of registered office.
• Form IX: Consent of directors to act.
• Form X: List of persons consenting to be directors.
• Form XII: Particulars of directors, manager, and managing agent.
• Copy of Name Clearance certificate.
• Encashment Certificate from the bank.
• Passport copies of foreign directors/shareholders.
• Board Resolution of the foreign parent company (if applicable), authorizing the establishment of the subsidiary.
• Power of Attorney (if a local representative is handling the registration).

All documents must be properly stamped and signed. The RJSC reviews these documents, and upon satisfaction, issues the Certificate of Incorporation.

"A company shall, on its registration, be a body corporate by the name contained in the memorandum, capable forthwith of exercising all the functions of an incorporated company, and having perpetual succession and a common seal, but with such liability on the part of the members to contribute to the assets of the company in the event of its being wound up as is mentioned in this Act."

Step 5: Obtaining Trade License

After incorporation, the company must obtain a Trade License from the relevant City Corporation or Union Parishad. This is a mandatory requirement for operating any business in Bangladesh. The application requires the Certificate of Incorporation, MoA, AoA, and a tenancy agreement for the business premises.

Step 6: Tax Identification Number (TIN) and VAT Registration

Every company operating in Bangladesh must obtain a Tax Identification Number (TIN) from the National Board of Revenue (NBR). This is done online. Additionally, if the company's annual turnover exceeds the threshold specified in the Value Added Tax and Supplementary Duty Act, 2012, it must register for VAT.

"Every company incorporated under the Companies Act, 1994, shall obtain a Taxpayer's Identification Number (TIN) in the manner prescribed by the Board."

"Every person liable to pay tax under this Act shall be required to be registered under this Act."

Step 7: BIDA Registration and One-Stop Services

Foreign investors are strongly advised to register with BIDA. BIDA provides crucial support, including facilitating various licenses, permits, and approvals from different government agencies through its One-Stop Service (OSS) portal. This significantly streamlines the post-incorporation compliance process.

"Bangladesh Investment Development Authority shall act as the apex body for encouraging, promoting and facilitating private investment in Bangladesh."

Step 8: Other Necessary Licenses and Approvals

Depending on the nature of your business, you may require additional licenses and permits. These could include:

• Environmental Clearance Certificate (ECC): From the Department of Environment, mandatory for certain industrial projects.
• Fire Safety License: From the Fire Service and Civil Defence.
• Factory License: From the Department of Inspection for Factories and Establishments (DIFE) for manufacturing units.
• Import Registration Certificate (IRC) and Export Registration Certificate (ERC): From the Chief Controller of Imports and Exports (CCI&E) if engaging in international trade.
• Drug License: For pharmaceutical companies.
• Telecommunication License: For telecommunication service providers.

Compliance and Post-Incorporation Formalities

Banking and Foreign Exchange Regulations

After incorporation, the temporary bank account should be converted into a regular corporate account. All foreign exchange transactions must comply with the Foreign Exchange Regulation Act, 1947, and Bangladesh Bank guidelines. This includes repatriation of profits, dividends, and capital gains, which are generally allowed subject to tax compliance and proper documentation.

"No person shall, except with the previous general or special permission of the Bangladesh Bank, bring or send into Bangladesh any foreign exchange."

Employment and Labour Laws

Companies must adhere to the Labour Act, 2006 (as amended), which governs employment conditions, wages, working hours, termination, and industrial relations. It's crucial to understand the provisions related to local and foreign employment, social security, and provident funds.

"This Act shall apply to every establishment, industrial undertaking, commercial establishment, shop and other establishment in Bangladesh."

Intellectual Property Rights

Protecting intellectual property is vital. Companies should consider registering their trademarks under the Trademarks Act, 2009, copyrights under the Copyright Act, 2000, and patents/designs under the Patents and Designs Act, 1911 (or the upcoming Patents Act, 2022). Bangladesh is a signatory to TRIPS Agreement.

Annual Compliance Requirements

• Annual Return to RJSC: Companies must file an annual return (Form 23B) with the RJSC, along with audited financial statements.
• Tax Returns: Annual income tax returns must be filed with the NBR.
• VAT Returns: Monthly or quarterly VAT returns, as applicable.
• Board Meetings and AGMs: Adherence to corporate governance requirements, including holding annual general meetings (AGMs) and board meetings.

Incentives and Benefits for Foreign Investors

BIDA, under the BIDA Act, 2016, offers various incentives to attract foreign investment. These include:

• Tax Holidays: Available for certain industrial sectors and economic zones.
• Duty-Free Import of Capital Machinery: For approved industrial projects.
• Repatriation Facilities: For profit, dividend, and capital gains.
• Bonded Warehouse Facility: For export-oriented industries.
• Access to Special Economic Zones (SEZs) and Export Processing Zones (EPZs): Offering enhanced incentives, infrastructure, and streamlined regulatory environments under the Special Economic Zones Act, 2010.

Dispute Resolution

In case of commercial disputes, the Arbitration Act, 2001, provides a framework for alternative dispute resolution, including domestic and international arbitration. Bangladesh is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, facilitating the enforcement of international arbitration awards.

"An arbitration agreement shall be in writing."

Conclusion and Expert Legal Assistance

Establishing a company in Bangladesh, while offering significant opportunities, involves a structured legal and regulatory process. Engaging experienced legal counsel from the outset can mitigate risks, ensure compliance, and expedite the establishment process. As Barrister Liton Asaduzzaman Sarkar, I am committed to providing precise and actionable legal guidance for your investment journey in Bangladesh.

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  <a href="https://www.roc.gov.bd/" target="_blank" rel="noopener noreferrer" style="color:#C5A059; font-weight:600; font-size:14px; text-decoration:underline;">Registrar of Joint Stock Companies & Firms (RJSC) &nearr;</a>
  <p style="color:#94A3B8; font-size:12px; margin:4px 0 0 0; line-height:1.4;">Online Name Clearance, MoA/AoA Registration & Returns Filing</p>
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  <a href="https://bida.gov.bd/" target="_blank" rel="noopener noreferrer" style="color:#C5A059; font-weight:600; font-size:14px; text-decoration:underline;">Bangladesh Investment Development Authority (BIDA) &nearr;</a>
  <p style="color:#94A3B8; font-size:12px; margin:4px 0 0 0; line-height:1.4;">One-Stop Service (OSS), 100% Foreign Equity Approvals & Branch/Liaison Office Permission</p>
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  <a href="https://bdlaws.minlaw.gov.bd/" target="_blank" rel="noopener noreferrer" style="color:#C5A059; font-weight:600; font-size:14px; text-decoration:underline;">Ministry of Law, Justice & Parliamentary Affairs &nearr;</a>
  <p style="color:#94A3B8; font-size:12px; margin:4px 0 0 0; line-height:1.4;">Codified Statutory Laws of Bangladesh</p>
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