Legal Framework for Startup Financing
Regulatory Compliance Matrix
| Phase | Governing Statute | Regulatory Authority |
|---|---|---|
| Equity Issuance | Section 151, Companies Act 1994 | RJSC |
| Foreign Inward Remittance | Section 18, Foreign Exchange Regulation Act 1947 | Bangladesh Bank (AD) |
| VC Fund Management | SEC (Alternative Investment) Rules 2015 | BSEC |
| Tax Exemption (IT Enabled) | Section 76, Income Tax Act 2023 | NBR |
Investment Process Roadmap
Key Procedural Steps
- Execution of Term Sheet & SHA: While the Term Sheet is often non-binding, the Shareholders' Agreement (SHA) must align with the Articles of Association (AoA) as per Section 20 of the Companies Act 1994.
- Valuation Certificate: For foreign investment, a valuation report prepared by a chartered accountant or merchant banker is required to justify the share premium under the Foreign Exchange Guidelines.
- CIB Clearance: Directors of the investee company must obtain Credit Information Bureau (CIB) clearance from Bangladesh Bank.
- Allotment of Shares: Following the encashment of the Encashment Certificate, the company must file Return of Allotment (Form XV) with the RJSC within 30 days pursuant to Section 151 of the Companies Act 1994.
Consult Barrister Liton Asaduzzaman Sarkar
Ensure your startup investment is legally sound and compliant with Bangladesh Bank regulations.
Schedule Legal ScopingFrequently Asked Questions
What is the time limit for filing share allotments with RJSC?
Under Section 151 of the Companies Act 1994, a company must file Form XV (Return of Allotment) within 30 days of the allotment of shares.
Is a valuation report mandatory for foreign angel investment?
Yes, as per Chapter 9 of the Guidelines for Foreign Exchange Transactions (Vol-1), a valuation report is required to ensure shares are not issued below fair value to foreign investors.
Can a startup issue convertible notes in Bangladesh?
Currently, the Companies Act 1994 does not explicitly define 'Convertible Notes'. Most startups use 'Convertible Preference Shares' governed by Section 59, or debt instruments that convert to equity upon specific triggers, subject to Bangladesh Bank approval.
◆ Related Statutory Guides & Practice Insights
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<a href="/en/repatriating-profits-bangladesh-foreign-exchange-rules/" style="color:#C5A059; font-weight:600; text-decoration:none; font-size:14px; display:inline-block; transition:color 0.2s;">• Repatriation of Profits from Bangladesh: Foreign Exchange Rules Guide</a>
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