100% Foreign Equity Company Setup & BIDA OSS Guide Bangladesh

.statutory-meta-box { background: #F8FAFC; border-left: 4px solid #0D2826; padding: 18px 22px; margin: 24px 0; border-radius: 4px; font-size: 0.95rem; } .featured-snippet-box { background: #FEF3C7; border: 1px solid #F59E0B; border-left: 5px solid #D97706; padding: 18px 22px; margin: 24px 0; border-radius: 6px; font-weight: 500; font-size: 1.05rem; line-height: 1.7; color: #92400E; } .featured-snippet-box strong { color: #78350F; font-weight: 700; } .statutory-table { width: 100%; border-collapse: collapse; margin: 28px 0; font-size: 0.95rem; } .statutory-table th, .statutory-table td { border: 1px solid #E2E8F0; padding: 12px 16px; text-align: left; } .statutory-table th { background: #0D2826; color: #FFFFFF; font-weight: 600; } .statutory-table tr:nth-child(even) { background: #F8FAFC; } .svg-infographic-wrap { margin: 32px 0; background: #0A1118; padding: 20px; border-radius: 8px; text-align: center; overflow-x: auto; } .svg-infographic-wrap svg { max-width: 100%; height: auto; } .faq-section { margin-top: 40px; border-top: 1px solid #E2E8F0; padding-top: 24px; } .faq-item { background: #FFFFFF; border: 1px solid #E2E8F0; border-radius: 8px; padding: 16px 20px; margin-bottom: 12px; } .faq-item h3 { font-size: 1.05rem; font-weight: 700; color: #0D2826; margin: 0 0 8px; } .cta-box { background: linear-gradient(135deg, #0D2826 0%, #17423F 100%); color: #FFF; padding: 36px; border-radius: 8px; text-align: center; margin: 40px 0; } .cta-box h3 { color: #FFF; margin-top: 0; } .cta-box a { background: #C9A84C; color: #000; font-weight: 700; padding: 12px 28px; text-decoration: none; border-radius: 4px; display: inline-block; margin-top: 14px; } </style><article class="legalbd-article"><div class="statutory-meta-box"><p><strong>Author:</strong> Barrister Liton Asaduzzaman Sarkar, Advocate, Supreme Court of Bangladesh</p><p><strong>Jurisdiction:</strong> Sovereign Republic of Bangladesh</p><p><strong>Statutory Governance:</strong> Companies Act 1994 | BIDA Act 2016 | FERA 1947 | Income Tax Act 2023</p></div><div class="featured-snippet-box"><strong>Executive Statutory Definition:</strong> Under Section 28 of the Bangladesh International Investment Promotion Agency Act 2016 and Section 389 of the Companies Act 1994, foreign investors can establish a 100% foreign equity private limited company without prior government equity permission, subject to inward remittance encashment verification through Bangladesh Bank authorized dealers under the Foreign Exchange Regulation Act 1947.</div><h2>1. Statutory Framework for Foreign Direct Investment (FDI) in Bangladesh</h2><p>Foreign Direct Investment in Bangladesh operates within an open, liberalized statutory structure established by the <strong>Foreign Private Investment (Promotion and Protection) Act 1980 (Act No. XI of 1980)</strong> and implemented through the <strong>Bangladesh International Investment Promotion Agency Act 2016 (BIDA Act 2016)</strong>. Except for four controlled industrial sectors reserved exclusively for state control—armaments and defense equipment, nuclear energy, minting currency, and forest extraction within reserved forests—foreign investors are legally entitled to retain 100% equity ownership in commercial entities without requiring prior government shareholding approval.</p><p>The primary vehicle for foreign participation is the domestic Private Limited Company incorporated under Section 2(1)(q) read with Section 28 of the <strong>Companies Act 1994 (Act No. XVIII of 1994)</strong>. Unlike branch or liaison offices governed under Section 378 of the same Act, a 100% foreign-owned subsidiary constitutes a distinct local legal person possessing perpetual succession, corporate personality, and full capacity to enter binding contracts, purchase immovable assets, and institute litigation before the High Court Division of the Supreme Court of Bangladesh.</p><h2>2. Step-by-Step Corporate Formation and Incorporation Procedure</h2><p>Establishing a fully foreign-owned corporate subsidiary involves a rigorous multi-stage regulatory sequence managed through the Registrar of Joint Stock Companies and Firms (RJSC) and Authorized Dealer (AD) Banks licensed by Bangladesh Bank.</p><h3>Phase 1: Name Clearance Application</h3><p>Under Section 4 and Section 11 of the Companies Act 1994, the prospective incorporators must secure an official Name Clearance Certificate from the RJSC portal. The proposed corporate title must not infringe upon registered trademarks governed by the Patents, Designs and Trademarks regime or violate public policy under the Undesirable Names Rules. The approved clearance remains valid for 180 days from the date of issuance.</p><h3>Phase 2: Temporary Offshore Bank Account & Inward Capital Remittance</h3><p>Prior to formal incorporation, the foreign parent company or foreign individual shareholders must open a temporary capital account with a commercial bank holding an Authorized Dealer (AD) license in Bangladesh under the <strong>Foreign Exchange Regulation Act 1947 (FERA 1947)</strong>. The paid-up capital must be remitted directly from the offshore shareholder’s institutional bank account into Bangladesh via convertible foreign currency (USD, EUR, GBP, SGD, etc.).</p><p>Upon receipt of funds, the AD Bank converts the currency into Bangladeshi Taka (BDT) and issues a statutory <strong>Encashment Certificate</strong>. This document serves as strict evidentiary proof to the RJSC and Bangladesh Bank that foreign equity capital has entered the country in compliance with Section 5 and Section 8 of FERA 1947.</p><h3>Phase 3: Execution of Constitutional Instruments</h3><p>The promoter must prepare the institutional <em>Memorandum of Association (MOA)</em> and <em>Articles of Association (AOA)</em>. The MOA defines the authorized capital and explicit corporate objects under Section 5 of the Companies Act 1994, while the AOA dictates internal governance, board quorum, transferability of shares, and executive powers. For 100% foreign equity companies, the subscriber page must clearly indicate the exact equity distribution corresponding to the issued Encashment Certificate.</p><h3>Phase 4: Formal Registration and Certificate of Incorporation</h3><p>The promoter submits the statutory filing suite through the online RJSC portal, comprising:</p><ul><li>Form I: Declaration of Compliance with Incorporation Requirements under Section 25.</li><li>Form VI: Notice of Situation of Registered Office under Section 77.</li><li>Form IX: Consent of Directors to Act under Section 92.</li><li>Form X: List of Persons Consenting to Act as Directors.</li><li>Form XII: Particulars of Directors, Manager, and Managing Agents under Section 115.</li><li>Encashment Certificate issued by the AD Bank.</li><li>Executed MOA and AOA stamped in accordance with the Stamp Act 1899.</li></ul><p>Upon statutory verification, the Registrar issues the official Certificate of Incorporation pursuant to Section 23(1) of the Companies Act 1994, establishing corporate personality.</p><h2>3. Statutory Comparison of Corporate Entity Formats</h2><table class="statutory-table"><thead><tr><th>Entity Format</th><th>Governing Legal Provision</th><th>Permissible Scope of Activities</th><th>Capitalization Rules</th><th>Profit Repatriation Protocol</th></tr></thead><tbody><tr><td><strong>100% Foreign Private Limited Subsidiary</strong></td><td>Companies Act 1994 & BIDA Act 2016</td><td>Unrestricted commercial operations, trading, manufacturing, servicing, and government tendering.</td><td>100% foreign equity permitted. BDT 1 nominal capital minimum (Practical FDI banking minimums apply).</td><td>Full dividend repatriation after local corporate tax clearance without prior Bangladesh Bank approval via AD Bank.</td></tr><tr><td><strong>Branch Office</strong></td><td>Section 378–386, Companies Act 1994</td><td>Commercial operations restricted strictly to activities authorized in the BIDA Permission Letter.</td><td>No domestic equity structure. Initial remittance of USD 50,000 required for setup/operational expenses.</td><td>Net operational profits repatriable via AD Bank after BIDA audit clearance and tax clearance under Section 382.</td></tr><tr><td><strong>Liaison / Representative Office</strong></td><td>BIDA Guidelines & Section 18B, FERA 1947</td><td>Non-commercial activities only: market study, coordination between overseas parent and local clients.</td><td>Zero local capital generation permitted. 100% operational expenses must be funded via inward remittance.</td><td>Prohibited from generating local revenue or commercial profit; zero repatriation scope.</td></tr></tbody></table><h2>4. Sequential Regulatory Roadmap for Foreign Investors</h2><div class="svg-infographic-wrap"><svg viewBox="0 0 800 240" class="process-roadmap" xmlns="http://www.w3.org/2000/svg"><rect x="10" y="20" width="140" height="80" rx="8" fill="#002B49"/><text x="80" y="55" fill="#FFFFFF" font-size="11" font-weight="bold" text-anchor="middle">STAGE 1</text><text x="80" y="75" fill="#E5E7EB" font-size="10" text-anchor="middle">RJSC Name Clearance</text><line x1="150" y1="60" x2="170" y2="60" stroke="#002B49" stroke-width="3"/><rect x="170" y="20" width="140" height="80" rx="8" fill="#002B49"/><text x="240" y="55" fill="#FFFFFF" font-size="11" font-weight="bold" text-anchor="middle">STAGE 2</text><text x="240" y="70" fill="#E5E7EB" font-size="9" text-anchor="middle">Inward Equity Remittance</text><text x="240" y="85" fill="#E5E7EB" font-size="9" text-anchor="middle">& Encashment Cert</text><line x1="310" y1="60" x2="330" y2="60" stroke="#002B49" stroke-width="3"/><rect x="330" y="20" width="140" height="80" rx="8" fill="#002B49"/><text x="400" y="55" fill="#FFFFFF" font-size="11" font-weight="bold" text-anchor="middle">STAGE 3</text><text x="400" y="70" fill="#E5E7EB" font-size="9" text-anchor="middle">RJSC Filing & Formal</text><text x="400" y="85" fill="#E5E7EB" font-size="9" text-anchor="middle">Incorporation</text><line x1="470" y1="60" x2="490" y2="60" stroke="#002B49" stroke-width="3"/><rect x="490" y="20" width="140" height="80" rx="8" fill="#002B49"/><text x="560" y="55" fill="#FFFFFF" font-size="11" font-weight="bold" text-anchor="middle">STAGE 4</text><text x="560" y="70" fill="#E5E7EB" font-size="9" text-anchor="middle">BIDA OSS Registration</text><text x="560" y="85" fill="#E5E7EB" font-size="9" text-anchor="middle">& Security Clearance</text><line x1="630" y1="60" x2="650" y2="60" stroke="#002B49" stroke-width="3"/><rect x="650" y="20" width="140" height="80" rx="8" fill="#002B49"/><text x="720" y="55" fill="#FFFFFF" font-size="11" font-weight="bold" text-anchor="middle">STAGE 5</text><text x="720" y="70" fill="#E5E7EB" font-size="9" text-anchor="middle">Post-Inc Licensing,</text><text x="720" y="85" fill="#E5E7EB" font-size="9" text-anchor="middle">TIN, BIN & Trade Lic</text><rect x="10" y="140" width="780" height="80" rx="6" fill="#F3F4F6" stroke="#D1D5DB"/><text x="400" y="165" fill="#1F2937" font-size="11" font-weight="bold" text-anchor="middle">STATUTORY MANDATE AND OPERATIONAL TIMELINE</text><text x="400" y="185" fill="#4B5563" font-size="10" text-anchor="middle">Average Processing Window: 4 to 6 Weeks | Governed by Companies Act 1994, BIDA Act 2016, and FERA 1947 Rules</text><text x="400" y="205" fill="#1E40AF" font-size="10" font-weight="bold" text-anchor="middle">Legal Safeguard: Inward equity must be remitted prior to RJSC share issuance verification</text></svg></div><h2>5. Post-Incorporation Compliance and BIDA One Stop Service (OSS)</h2><p>Upon receiving the Certificate of Incorporation, the legal entity must execute mandatory secondary registrations through the integrated <strong>BIDA One Stop Service (OSS) platform</strong> established under Section 16 of the BIDA Act 2016.</p><h3>Taxation and Revenue Registrations</h3><ol><li><strong>e-TIN Procurement:</strong> The company must register for a 12-digit electronic Tax Identification Number (e-TIN) with the National Board of Revenue (NBR) pursuant to Section 261 of the <strong>Income Tax Act 2023 (Act No. XII of 2023)</strong>.</li><li><strong>Value Added Tax (BIN) Registration:</strong> Registration for a Business Identification Number (BIN) is mandatory under Section 45 of the Value Added Tax and Supplementary Duty Act 2012 before engaging in commercial transactions or import/export activities.</li><li><strong>Trade License Acquisition:</strong> Issued by the relevant City Corporation or Local Government authority pursuant to local municipality government regulatory acts.</li></ol><h3>Import/Export & Specialized Permits</h3><p>Entities intending to engage in international trade must acquire an Import Registration Certificate (IRC) or Export Registration Certificate (ERC) from the Office of the Chief Controller of Imports and Exports (CCI&E) under the Importers, Exporters and Indentors (Registration) Order 1981.</p><h2>6. Inward Remittance, Share Capitalization, and Profit Repatriation Protocols</h2><p>Foreign Exchange controls in Bangladesh are governed strictly by Bangladesh Bank under <strong>FERA 1947</strong> and the <em>Guidelines for Foreign Exchange Transactions (GFET)</em>. Compliance with capital capitalization protocols is mandatory to prevent exchange control violations.</p><h3>Filing Share Issuance (Form 117 & Form IV)</h3><p>Once initial inward capital is encashed and incorporated into the company's capital accounts, the Board of Directors must formalize the issuance of shares to the foreign investor. The entity must file Form IV (Return of Allotment) with RJSC within 60 days under Section 151 of the Companies Act 1994. Concurrently, a formal declaration of capital issuance must be reported to the Foreign Exchange Policy Department of Bangladesh Bank via the Authorized Dealer bank within 14 days of share issuance.</p><h3>Repatriation of Dividends and Capital Profits</h3><p>Under Section 18 of FERA 1947, foreign investors enjoy full statutory guarantees regarding the remittance of post-tax profits, dividends, and net capital gains. Dividend repatriation does not require prior approval from Bangladesh Bank if processed through an Authorized Dealer bank, provided the following statutory documentation is presented:</p><ul><li>Audited financial statements prepared in accordance with International Financial Reporting Standards (IFRS) and audited by a chartered accounting firm registered in Bangladesh.</li><li>Board Resolution declaring the annual dividend and Shareholder Resolution adopted at the Annual General Meeting (AGM).</li><li>Tax Clearance Certificate issued by the Deputy Commissioner of Taxes under Section 162 of the Income Tax Act 2023 confirming corporate tax compliance.</li><li>Form A2 application for foreign exchange transaction.</li><li>Auditor Certification confirming the availability of net post-tax profits.</li></ul><h3>Royalties, Technical Fees, and Management Overhead Remittances</h3><p>Under current BIDA and Bangladesh Bank operational regulations, industrial enterprises are permitted to remit recurring technical know-how fees, technical assistance fees, operational management fees, and royalty payments without prior Bangladesh Bank approval, provided the total cumulative fee does not exceed <strong>6% of the net operational revenue</strong> or project cost of the enterprise as verified by BIDA.</p><h2>7. Labour Law Compliance and Expatriate Work Permits</h2><p>Foreign entities operating commercial enterprises within Bangladesh must conform strictly to the statutory mandates of the <strong>Bangladesh Labour Act 2006 (Act No. XLII of 2006)</strong>.</p><h3>Expatriate Work Permit Protocols</h3><p>Foreign nationals employed as directors, executives, or technical consultants within a 100% foreign equity company must secure an official Work Permit from BIDA under Section 22 of the BIDA Act 2016. The statutory ratio requires that companies maintain a minimum of <strong>20 domestic employees for every 1 foreign expatriate employee</strong> (1:20 ratio) in commercial operations, or 1:10 in manufacturing entities.</p><p>Key steps for expatriate employment include:</p><ul><li>Obtaining an initial B2 / PI category entry recommendation visa from BIDA.</li><li>Formal Work Permit application through the BIDA OSS platform within 15 days of arrival.</li><li>Security Clearance approval from the Special Branch of Police / Ministry of Home Affairs.</li><li>Personal e-TIN procurement and annual income tax filing under Section 166 of the Income Tax Act 2023 for expatriate income earned in Bangladesh.</li></ul><h2>8. Precedential High Court Division Jurisprudence</h2><p>The judiciary of Bangladesh consistently reinforces corporate rights, foreign equity security, and strict procedural compliance under foreign exchange and corporate rules. Landmark precedents include:</p><ul><li><em>Société Générale v. Bangladesh Bank (44 DLR HCD 312):</em> The High Court Division affirmed that statutory permissions and exchange control allocations executed by Bangladesh Bank or Authorized Dealers under FERA 1947 create vested procedural rights that cannot be arbitrarily revoked without due administrative process.</li><li><em>Chairman, Board of Revenue v. Delta Life Insurance Co. (58 DLR AD 56):</em> The Appellate Division emphasized that corporate corporate forms and valid statutory share allotments registered under the Companies Act must be legally recognized by regulatory authorities unless substantive fraud is established.</li></ul><div class="cta-box"><h3>Need Strategic Legal Counsel for Bangladesh FDI Setup?</h3><p>Consult Barrister Liton Asaduzzaman Sarkar, Advocate of the Supreme Court of Bangladesh, for expert statutory guidance on corporate setup, RJSC filings, BIDA OSS approvals, and cross-border exchange control compliance.</p><a href="/en/contact/">Schedule Strategic Consultation</a></div></article><section class="faq-section"><h2>Frequently Asked Questions</h2><div class="faq-item"><h3>Is 100% foreign equity ownership legally permitted in Bangladesh without a local partner?</h3><p>Yes. Under Section 28 of the Bangladesh International Investment Promotion Agency Act 2016 and Section 389 of the Companies Act 1994, foreign entities and foreign individuals can hold 100% equity ownership in a domestic private limited company without a local Bangladeshi shareholder, provided the sector is not reserved exclusively for state control.</p></div><div class="faq-item"><h3>What is the statutory requirement for inward equity remittance prior to company registration?</h3><p>Under the Foreign Exchange Regulation Act 1947 (FERA 1947), the paid-up foreign capital must be remitted via an Authorized Dealer (AD) Bank in Bangladesh. The bank converts the funds to local currency and issues an Encashment Certificate, which must be submitted to the Registrar of Joint Stock Companies and Firms (RJSC) as evidentiary proof of equity.</p></div><div class="faq-item"><h3>Are prior approvals required from Bangladesh Bank to repatriate annual dividends?</h3><p>No. Under Section 18 of FERA 1947 and current Bangladesh Bank Foreign Exchange Guidelines, dividend repatriation for a 100% foreign equity company can be processed directly by Authorized Dealer banks without prior Bangladesh Bank permission, provided tax clearance under the Income Tax Act 2023 and audited financial statements are produced.</p></div><div class="faq-item"><h3>What is the legal ratio requirement for employing expatriate staff in a foreign company?</h3><p>Pursuant to BIDA Work Permit guidelines under the BIDA Act 2016, commercial corporate entities must maintain a minimum employment ratio of 20 local Bangladeshi employees for every 1 foreign expatriate (1:20 ratio). In industrial manufacturing sectors, the mandated ratio is 1:10.</p></div><div class="faq-item"><h3>What statutory registrations are required immediately after RJSC incorporation?</h3><p>Following incorporation under Section 23 of the Companies Act 1994, the company must register for an electronic Tax Identification Number (e-TIN) under Section 261 of the Income Tax Act 2023, a Value Added Tax (VAT/BIN) certificate under Section 45 of the VAT Act 2012, a municipal Trade License, and BIDA OSS registration.</p></div></section>

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100% Foreign Equity Company Setup & BIDA OSS Guide Bangladesh

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