1. Introduction to Foreign Direct Investment (FDI) in Bangladesh
Bangladesh has emerged as one of the fastest-growing economies in South Asia, attracting substantial Foreign Direct Investment (FDI). For foreign corporations seeking to establish a commercial presence in Bangladesh, navigating the regulatory and statutory landscape is critical. The legal framework governing foreign investment is designed to offer robust protections while ensuring compliance with national economic policies. The cornerstone of investment protection is the Foreign Private Investment (Promotion and Protection) Act 1980. Specifically, Section 4 of the Act guarantees non-discriminatory treatment between foreign and local investments, while Section 5 secures the right to transfer capital and repatriate profits. Under the Bangladesh Investment Development Authority (BIDA) Act 2016, BIDA serves as the primary regulatory body facilitating and promoting foreign investment in the country.
2. Modes of Entry for Foreign Entities
A foreign enterprise can establish its presence in Bangladesh through three primary legal vehicles:
- Wholly-Owned Subsidiary or Joint Venture (JV) Company: A locally incorporated limited liability company where the foreign parent entity holds up to 100% shares (wholly-owned) or partners with local shareholders (JV).
- Branch Office: An extension of the foreign parent company authorized to engage in commercial activities, subject to specific regulatory approvals.
- Liaison or Representative Office: An entity established solely to facilitate communication, market research, and promotional activities. It is strictly prohibited from engaging in commercial or revenue-generating activities.
3. Legal Framework for Incorporating a Subsidiary Company
Incorporation of a subsidiary company is governed by the Companies Act 1994. The process is managed online through the Registrar of Joint Stock Companies and Firms (RJSC).
Step 1: Name Clearance
Under Section 11 of the Companies Act 1994, the proposed company name must not be identical or closely resemble any existing registered company. An application for name clearance must be submitted to the RJSC database. Once approved, the name is reserved for a period of 180 days.
Step 2: Drafting Constitutional Documents
The constitutional foundation of the company comprises the Memorandum of Association (MoA) and the Articles of Association (AoA). Under Section 5 and Section 17 of the Companies Act 1994, the MoA defines the company's objectives and scope of operations, while the AoA outlines the internal management regulations, share transfer protocols, and board composition. For foreign entities, these documents must be drafted with precise clauses detailing dispute resolution mechanisms, typically referencing the Arbitration Act 2001 to ensure international commercial arbitration options under Section 3 and Section 45.
Step 3: Opening a Temporary Bank Account and Inward Remittance
Under the exchange control regulations administered by the Bangladesh Bank pursuant to the Foreign Exchange Regulation Act 1947 (Amended) (Sections 5 and 8), a temporary bank account must be opened in the name of the proposed company with an authorized dealer bank. The foreign shareholders must remit the minimum capital (though there is no statutory minimum for incorporation, BIDA requires at least USD 50,000 for work permit eligibility). The bank will issue an Encashment Certificate, which serves as statutory proof of capital inflow required by the RJSC.
Step 4: Submission and Registration with RJSC
Upon securing the Encashment Certificate, the MoA, AoA, and Form IX (Consent of Director), Form XII (Particulars of Directors), and Form VI (Notice of Situation of Registered Office) must be executed and submitted to the RJSC. After verifying the documents and payment of government registration fees (calculated based on the authorized capital under Schedule II of the Companies Act 1994), the RJSC issues the Certificate of Incorporation.
4. Establishing a Branch or Liaison Office
Unlike a subsidiary, a Branch or Liaison Office is not a separate legal entity; its liabilities extend to the foreign parent company. The establishment of these offices is governed by Section 15 of the BIDA Act 2016 and Section 379 of the Companies Act 1994.
Step 1: BIDA Approval
The foreign parent company must submit a formal application to BIDA. The application must include audited financial statements of the parent company, board resolutions authorizing the opening of the office, and detailed operational plans. Under BIDA guidelines, a minimum operational expense of USD 50,000 must be remitted to Bangladesh within two months of approval.
Step 2: Registration with RJSC
Following BIDA approval, the foreign entity must file its charter, statutes, memorandum, and articles (translated into English if in another language) with the RJSC within 30 days under Section 379 of the Companies Act 1994. The RJSC will then issue a registration certificate for the branch or liaison office.
5. Post-Registration Statutory Compliances
Once incorporated or registered, the foreign entity must obtain several statutory licenses and registrations to commence operations:
A. Trade License
Every commercial entity must obtain a Trade License from the respective local government authority (e.g., City Corporation or Union Parishad) pursuant to the local government acts.
B. Tax and VAT Registration
The company must register for a Taxpayer Identification Number (TIN) with the National Board of Revenue (NBR) under Section 261 of the Income Tax Act 2023. Corporate tax rates vary based on whether the entity is publicly traded, non-publicly traded, or operating in specific sectors. Additionally, the entity must secure a Business Identification Number (BIN) for Value Added Tax (VAT) compliance under Section 4 and Section 6 of the Value Added Tax and Supplementary Duty Act 2012.
C. BIDA Work Permits
Foreign nationals employed by the company must obtain a work permit from BIDA under the provisions of the BIDA Act 2016. This requires securing an 'E' category visa from the relevant Bangladesh Embassy abroad, followed by a formal work permit application in Bangladesh within 15 days of arrival.
D. Labour Law Compliance
Any company employing workers in Bangladesh must comply with the Bangladesh Labour Act 2006. This includes adhering to statutory provisions regarding employment contracts (Section 3), working hours, maternity benefits, and provident funds. Special attention must be paid to Section 2(49a) and Section 321 regarding industrial relations and employee welfare.
6. Intellectual Property Protection
Securing corporate identity and intellectual assets is paramount for foreign investors. Trademarks must be registered under Section 15 and Section 24 of the Trademarks Act 2009 to prevent infringement. Similarly, proprietary software, creative works, and designs should be protected under the Copyright Act 2000 to ensure complete legal recourse in the event of intellectual property theft.
7. Dispute Resolution and Foreign Investment Protection
In the event of commercial disputes, foreign investors are protected by the Arbitration Act 2001, which recognizes international arbitration agreements. Bangladesh is a signatory to the ICSID Convention (International Centre for Settlement of Investment Disputes) and the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, ensuring that foreign arbitral awards are enforceable in Bangladesh courts under Section 45 of the Arbitration Act 2001.
Need Professional Legal Assistance?
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Frequently Asked Questions
What is the minimum capital requirement for registering a foreign subsidiary in Bangladesh?
While there is no statutory minimum capital required under the Companies Act 1994, BIDA requires an inward remittance of at least USD 50,000 to qualify for foreign employee work permits and operational approvals.
Can a foreign company own 100% shares of a Bangladeshi company?
Yes, under the Foreign Private Investment Act 1980, 100% foreign ownership is permitted in most sectors, except for a few restricted industries like defense, nuclear energy, and forest forestry.
What is the difference between a Branch Office and a Liaison Office?
A Branch Office can engage in commercial, profit-generating activities with BIDA approval. A Liaison Office is strictly non-commercial and can only perform promotional activities, market research, and act as a communication channel.
How long does it take to register a foreign company in Bangladesh?
The incorporation of a subsidiary typically takes 3 to 4 weeks. Establishing a Branch or Liaison Office through BIDA and RJSC usually takes 6 to 8 weeks, depending on regulatory approvals.
Is a local director mandatory for a foreign-owned subsidiary?
No, a local director is not mandatory. All directors can be foreign nationals, provided they obtain a valid Taxpayer Identification Number (TIN) and comply with local corporate regulations.
Legal References
- Companies Act 1994 Section 11 — Governs the clearance and reservation of the corporate name.
- Companies Act 1994 Section 379 — Regulates the registration of foreign companies, branch offices, and liaison offices.
- Foreign Private Investment (Promotion and Protection) Act 1980 Section 5 — Guarantees the repatriation of foreign capital and investment returns.
- Bangladesh Investment Development Authority Act 2016 Section 15 — Empowers BIDA to approve and regulate foreign branch and liaison offices.
- Foreign Exchange Regulation Act 1947 (Amended) Section 5 — Governs the inward and outward remittance of foreign currencies.
বাংলাদেশে বিদেশী কোম্পানি নিবন্ধন করার আইনি প্রক্রিয়া
বাংলাদেশে বিদেশী কোম্পানি, শাখা বা লিয়াজোঁ অফিস নিবন্ধনের আইনি প্রক্রিয়া এবং প্রয়োজনীয় ধাপসমূহ এই নিবন্ধে বিস্তারিত আলোচনা করা হয়েছে। কোম্পানি আইন ১৯৯৪ এবং বিডা (BIDA) নির্দেশিকা অনুযায়ী এই সম্পূর্ণ প্রক্রিয়াটি সম্পন্ন করতে হয়।
| Stage / Process | Applicable Act & Section | Official Fees (BDT) | Statutory Authority |
|---|---|---|---|
| Name Clearance & Approval | Companies Act 1994, Section 37 | BDT 1,150 - 2,300 | Registrar of Joint Stock Companies and Firms (RJSC) |
| Foreign Entity Registration | Companies Act 1994, Section 379 | Variable (Based on Authorized Capital) | Registrar of Joint Stock Companies and Firms (RJSC) |
| Branch/Liaison Office Permission | Bangladesh Investment Development Authority (BIDA) Act 2018 | BDT 25,000 - 50,000 | Bangladesh Investment Development Authority (BIDA) |
| Business Identification Number (BIN/VAT) | Value Added Tax and Supplementary Duty Act 2012 | Free of Cost | National Board of Revenue (NBR) |
| Income Tax Registration (e-TIN) | Income Tax Act 2023 | Free of Cost | National Board of Revenue (NBR) |
◆ Related Statutory Guides & Practice Insights
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