This article discusses the key aspects of the formation and operation of joint ventures in Bangladesh, including the statutory framework, legal forms, nature and types of JV, regulatory requirements and step by step registration process, legal documentation, dispute resolution, and finally benefits and challenges of establishing JVCs.

Bangladesh’s economy has maintained consistent growth over the past decade, with the average yearly GDP growth rate rising higher than roughly 6% per year. The country is undergoing a significant transition from an agriculture-based economy to one driven by manufacturing and services, making opportunities for joint ventures across various sectors.

Bangladesh has also emerged as an attractive destination for international businesses seeking to establish joint ventures. If you want to start a business in Bangladesh, a Joint Venture Company (JVC) is a great option, besides other incorporation options – setting-up a Subsidiary Company, a Bangladeshi Branch or Liaison office, etc.

Key features of Joint Venture (JV) Company in Bangladesh

Joint Venture Companies (JVCs) represent a collaborative business structure where two or more parties share resources, expertise, and capital to achieve a common goal.

• The Bangladesh Joint Venture Company, upon incorporation, is treated as a separate legal person/entity distinct from its parent Company, i.e. the company is regarded as a Bangladeshi Company.
• Parent Companies or foreign investors can incorporate a Joint Venture company in partnership with any local entrepreneurs or entities.
• There is no mandatory ownership ratio in share distribution, unlike many jurisdictions, which means foreign companies can own as many shares as possible, subject to the joint venture agreement.
• To register a private limited Company there must be a minimum of two shareholders/directors and a maximum of 50 shareholders. Shareholders can be any legal person, i.e., corporations or individuals over 18 years of age.
• Although there is no minimum investment requirement in Bangladesh, companies seeking to hire foreign nationals must ensure a minimum inward remittance or investment of USD $50,000.
• Additionally, if foreign nationals are hired, the Company must maintain a ratio of foreign to domestic employees of 1:5, but may apply for a waiver of this requirement with justification.
• Perpetual succession: the existence of the corporation will continue even if the members of the company change or die.
• Parties share profits, losses, and liabilities in proportions outlined in the joint venture agreement.

Types of Joint Venture Companies in Bangladesh

Domestic Joint Ventures: These JVs are formed only between local parties within the same country, and are used in industries like real estate, technology, and manufacturing, etc..

International Joint Ventures (IJVs): These are partnerships between entities from different countries used by multinational corporations.

Wholly Owned Joint Ventures: One party holds the majority ownership of the JV while the other provides additional resources, supports or services.

Public-Private Partnerships: Collaboration between government entities and private organizations to undertake infrastructure, energy, or public service development projects.

Project-Based Ventures: Designed to achieve specific, time-sensitive objectives (construction, product launches, etc.) and dissolves upon completion.

Joint Venture By Contract: The parties to the Joint Venture agree to cooperate in carrying out the project in accordance with terms set forth in the contract without the creation of a separate entity.

Functional-based Joint-Ventures: By this it concentrates on a particular function or domain like marketing, research and development (R&D), or production and working in collaboration.

Benefits of forming a JV in Bangladesh

a) Local Knowledge: Local partners offer insights into Bangladeshi market dynamics, consumer behavior, regulatory matters, and cultural issues, enhancing the chances of success in the market.

b) Risk Sharing: By spreading financial risks across partners, joint ventures reduce individual burdens and exposure. This helps to undertake ambitious initiatives that might be too risky for a single entity.

c) Access to Resources: Local partnerships help foreign partners access local resources, such as land and labor, more efficiently.This helps in increasing production capacity and technical expertise as well as widening distribution channels of the products.

d) Improved Competitiveness: Partners utilizing each other’s strengths, may lead to improved operational efficiency in operation and an effective positioning against the competitors.

e) Flexibility: the companies can keep their autonomy and resume normal business afterwards, as JVs are usually temporary arrangements made for any specific project.

f) Regulatory Advantages: Bangladesh has a simplified and supportive registration process along with incentives for foreign partners with substantial technology and capital into a JV.

g) Growth Opportunities: Joint ventures can be a golden opportunity for companies to enter and expand into new markets, or develop new products in a much more efficient manner than they could do independently.

Challenges of forming a JV in Bangladesh

Foreign investors considering a joint venture in Bangladesh must understand that forming such an entity requires compliance with local laws and close collaboration with local businesses. Joint ventures in Bangladesh can also face challenges like cultural and management differences, where differences in business practices , ethics due to different education systems and leadership styles can cause misunderstandings. Changes in one partner’s business may disrupt the JV’s focus.

Given the complexity of local laws, legal advice is often needed. Market fluctuations may impact profits if not promptly addressed. Compared to local partners, foreign entities could face operational problems such as transportation and skilled labor shortages, as well as logistics issues.

Step-by-step Process of Joint Venture Registration in Bangladesh

One or more foreign investors can establish joint ventures and set-up a Joint Venture Company in Bangladesh with the collaboration of one or more Bangladeshi investors. A Joint Venture fits your needs if you want to work in collaboration with Bangladeshi entrepreneurs. Being backed by local partners may also significantly decrease your risk with JV. Additionally, local businesses are always willing to work with foreign partners in joint ventures in which foreign partners furnish foreign exchange funds, equipment, technology, and expertise, and local companies contribute land and real estate and knowledge of the domestic market.

Outlined below is the step-by-step process for establishing a joint venture company in Bangladesh:

1.     Step one – Joint Venture Agreement (JVA):

You need to enter into a written joint venture agreement first. To begin, formalize a written agreement, outlining the nature of business, the shareholding ratios, board composition, governing laws, and other operational details. Every partner should sign the agreement and this is usually printed on a BDT 300 non-judicial stamp. A joint venture agreement includes the following elements:

• Scope and Objectives: sets out why the joint venture (JV) exists and what it aims to achieve.
• Company Name: Decide and Confirm the official name under which the JV will operate.
• Ownership Shares: Agree on how much each partner owns (e.g., 50-50 or another split).
• Financial Contributions: Specify who will provide money, assets, or other resources for the business.
• Intellectual Property (IP) Ownership: It is important to decide who owns any ideas, designs, or technology (IP) created by the JV..
• Governing Laws and Jurisdiction: Decide on the laws and processes to follow in case of disagreements or legal issues along dispute resolution venue
• Liabilities and Risk Allocation: Clarify what each partner is responsible for and how risks are shared.
• Board of Directors: Clearly specify the structure, roles, and decision-making powers of the board.
• Exit Clause: Exit clauses often save resources and expenses when the partners intend to close the business.
• Additional protection: In order to protect your business interest, you may also need supplementary agreement, such as, Confidentiality Agreements to safeguard sensitive information and trade secrets, and Non-Compete Agreements to prevent partners from starting a competing business during or after the JV.

2.     Step two – Application for Name Clearance at RJSC:

After that you have to apply to the Registrar of Joint Stock Companies and Firms (RJSC) for name clearance ( this is an official search to know if no one else contains the same name). Because of this, you may be required to have a few names for the company.

3.     Step three – Bank account opening and Encashment Certificate:

Company’s shareholding amount must be deposited into the proposed company’s bank account. If the company employs foreign nationals, the minimum inward remittance should be US $50,000.00. Later you will receive an encashment certificate as evidence of the company’s paid-up capital.

4.     Submission of documents to RJSC:

Once you received the encashment certificate and name clearance, the following documents are required to be filed with RJSC:

i. Memorandum of Association and Articles of Association; ii. Declaration on Registration of Company (Form-I); iii. Notice of Situation of Registered Office or if there are any changes (Form-VI); iv. Consent of Director to act (Form-IX); v. List of Persons Consenting to be Directors often known as Shareholders’ list (Form-X); vi. Particulars of the Directors, Manager and Managing Agents (Form-XII); vii. Evidence of Name Clearance; viii. Special Adhesive Stamps and Treasury Challan from Bangladesh Bank; ix. Notice of the Address of the Registered or Principal Office of the Company; Deed of Agreement on Partnership.

5.     Post-registration compliance:

After incorporation, the JVC Company must obtain various clearances/licenses. Irrespective of the category of their businesses, the Companies must obtain trade licenses from the relevant City Corporation, Municipalities, Union Parishad, etc. Tax Identification Number (TIN) and VAT Registration Certificate (Value Added Tax) from National Board of Revenue (NBR).  As prerequisites for starting business operations, additional permissions like fire certificate provided by the Bangladesh Fire Service and Civil Defense Authority and environmental certificates from the Department of Environment may also be needed.

6.     Statutory/Annual Filing and Compliance:

Work visas and other permits are also essential for companies hiring foreign nationals. Upon registration, the Company must also comply with RJSC requirements as per the Companies Act, 1994 for holding board meetings, annual general meetings, and submit the necessary returns to the RJSC along with the other authorities.

Impact of the Tax Environment on Joint Ventures in Bangladesh

The tax environment in Bangladesh plays a significant role, and it is essential to have an insight about tax implications for effective financial planning and compliance:

Tax Structure: Taxes are imposed on net profit (income-expense) of the taxpayer as per Bangladesh Income Tax Ordinance, 1984. The tax rate can change depending on where the partners live and if there are agreements to avoid double taxation. It’s important to set up clear profit-sharing arrangements to handle this.

Tax Rates: JVs in Bangladesh undergo corporate tax rates that may depend on the nature of the business. The general corporate tax rate is 25% to 35%, export-oriented businesses’ rate is 50% and special rates for banking and insurance are as high as 40%. JVs that align with government priorities may get financial benefits with incentives from the government.

Tax Compliance: JVs must maintain Tax Identification Number (TIN) and regular filings of annual tax returns. There are penalties and legal implications for failure to comply with these requirements.

Capital Contributions including Non-Cash Assets: Capital contributions can include cash and non-cash assets including land or equipment which should be properly valued to avoid disputes regarding ownership and taxation.

Transfer Pricing Regulations: In case of multinational joint ventures, all transactions must be fair and at market value to avoid tax evasion and to prevent profit shifting.

Exit Strategies and Capital Gains Tax: Understanding when capital gains taxes may apply is an important consideration for planning exit strategies, whether through asset transfers or sale of shares.

Tax Holiday and Tax Exemption

• Tax Holiday and Tax Exemption
• Businesses can enjoy 5 to 10 years of reduced or no tax, depending on their location.
• 10 years 100% tax exemption for income and capital gain on certain projects under Public Private Partnership (PPP);
• Investments in certain preferred sectors such as Power, entitled to tax exemption for 15 years.
• 100% tax exemptions on software development, Nationwide Telecommunication Transmission Network or Information Technology Enabled Services.
• 50% of revenue from export is tax free.
• Exemption from tax on royalties, technical expertise, technical help fees, and facilities for their repatriation
• Exemption on interest paid on loans in foreign currency.

Dispute Resolution Framework for JVs

If a disagreement arises in a joint venture, you can resolve it through Alternative Dispute Resolution (ADR). In many cases, Mediation is often a better option, where one partner is buying out the other or dividing the business between partners. Mediation often achieves practical solutions that work for everyone by saving time, money, and avoiding damage to the business. You can also use The Arbitration Act, 2001 of Bangladesh as a formal way to settle disputes in joint venture companies

Restricted Activities for Foreign Companies

Foreign investors can participate in almost all legal business activities in Bangladesh. But some sectors like arms and ammunition, nuclear energy and currency printing are not allowed. Freight forwarding is still regulated, where foreigners are limited to a maximum of 40% shareholding. Joint Ventures, on the other hand, can be used for trade and for establishing factories and numerous other things, as long as they obtain both the necessary clearances and licenses.

Making the JVs work will require careful selection of partners, a deep understanding of the regulatory environment and the ability to manage operational challenges.

LegalBD will guide you along this path.

Detailed FAQ on Joint Venture Companies in Bangladesh

1. What is a Joint Venture (JV) in Bangladesh?

A joint venture company is an agreement in a business where two or more parties come together to pool their resources or expertise or to build a new company or business as part of their new agreement. In Bangladesh, Joint Venture companies are typically established as private limited companies within the framework of the Companies Act, 1994, and consist of both local and foreign partners.

2. What laws govern Joint Venture Companies in Bangladesh?

The legal framework governing joint ventures (JVs) in Bangladesh is primarily regulated by:

• The Companies Act, 1994: Governs the incorporation and operation of companies.
• The Contract Act, 1872: Governs joint venture agreements between parties.
• The Bangladesh Investment Development Authority (BIDA) Act, 2016: This Act can identify potential joint venture partners and suppliers and offer guidance on doing business in Bangladesh.
• The Foreign Exchange Regulation Act, 1947: Regulates foreign investments and remittance of profits.
• The Income Tax Ordinance, 1984: Deals with taxation of JV companies.
• Public Procurement Act, 2006: This Act allows JVs to participate in procurement proceedings.
• Relevant sector-specific laws: Such as the Bangladesh Energy Regulatory Act, 2003, or the Export Processing Zones Act, 1980.

3. Nature of Joint Venture Companies in Bangladesh

The nature and types of joint venture companies vary depending on the purpose, structure, and jurisdiction.

• Collaborative Partnership: A JVC is formed based on shared objectives between local and foreign partners or among domestic entities by sharing their complementary strengths. 
• Separate Legal Entity JVC as a separate legal entity distinct from its parent companies ensures limited liability and autonomy.
• Flexible Structure: Joint ventures have various forms, including partnerships, corporations, or contractual agreements, depending on the jurisdiction and the nature of the business.
• Shared Risks and Rewards: Parties share profits, losses, and liabilities in proportions outlined in the joint venture agreement.

4. Types and Examples of Joint Venture Companies in Bangladesh

• Industrial Ventures: Establishing joint setups in textiles, electronics, or pharmaceuticals between local and foreign firms.
• Service Sector Ventures: IT and telecom, banking, in which global companies partner with Bangladeshi companies to provide localized solutions.
• Infrastructure and Energy Ventures: Public-private partnerships for power plants, roads and other renewable energy programs.
• Freight Forwarding Ventures: Foreign investment in freight forwarding in Bangladesh is limited to 40%, which accelerates the joint ventures with Bangladeshi companies.

5. Can foreign investors participate in Joint Ventures?

Yes, foreigners are allowed, and highly encouraged, to take part in JVs in Bangladesh, mainly in priority sectors like: Energy and Power; Infrastructure Development; Manufacturing; Technology and IT; Garments and Textiles; Foreign investments are governed by: BIDA guidelines: streamlining foreign investment processes, etc.

6. What is the process of dissolving a JV company?

A JV company can be dissolved:

• Voluntarily: Partners can manually dissolve by mutual agreement.
• Compulsory Winding-Up: This is initiated through a court order in case of insolvency or a violation of regulatory provisions.
• Expiration of Term: In case of the JV formed for a certain project or timeframe.

7. How are disputes in JVs resolved in Bangladesh?

Disputes can be resolved through:

• Negotiation: Partners work together on a solution that is mutually acceptable.
• Mediation: A neutral third party is involved to facilitate resolution.
• Arbitration: the submission of disputes to a arbitration panel under the Arbitration Act, 2001.
• Litigation: Filing a case in Bangladeshi courts, civil/criminal, although this can be time-consuming.
• Generally, a dispute resolution clause indicating the preferred method of resolution is included in JV agreements.

8. What are the tax implications for JV in Bangladesh?

• Corporate Tax: Joint venture companies will be liable to corporate tax as per the applicable rates, varying by sector (e.g. 27.5 for non-listed companies and lower for export-oriented).
• VAT: Value Added Tax (15%) on products and services.
• Withholding Taxes: Tax for some payments, such as dividends or royalties.
• Tax incentives: For certain sectors and EPZs.

9. Are there sector-specific regulations for JVs?

Yes, some sectors, such as energy, telecommunications, and financial services, may be subject to additional approvals or laws and regulations specific to the sector. [check our foreign investment policy guide]

• Power Sector: Bangladesh Energy Regulatory Commission (BERC) regulates the power sector.
• Telecom: Regulated by the Bangladesh Telecommunication Regulatory Commission (BTRC).

10. What are the common sectors for Joint Ventures in Bangladesh?

Joint ventures are particularly prominent in sectors such as:

• Energy and Power: Renewable energy projects, power plants and energy infrastructure
• Infrastructure Development – Roads, bridges, ports and housing projects.
• Garments and Textiles: Manufacturing and export-driven sectors.
• Telecommunications and IT: Technology parks, software development, and digital infrastructure.
• Drugs: Drug manufacturing and research partnerships.
• Livestock and Agriculture: Sustainable agriculture and agro-processing businesses.

11. Can a JV company operate in Export Processing Zones (EPZs)?

Yes, JV companies can operate in EPZs and enjoy significant incentives, including:

• Tax holidays of up to 100% for certain years.
• Imported raw materials and machinery at zero duty.
• Full repatriation of profits for foreign investors.

12. Can foreign partners repatriate their profits?

Yes, after complying with relevant elements of regulation, foreign partners may repatriate their profit, capital, or dividend, such as: Filing of audited financial statement; Bangladesh Bank approval for remittance. [check our foreign investment policy guide]

13. How to share profits and losses in a JV?

Profits and losses are usually allocated in accordance with the amount of capital put up or as specified in the Joint Venture Agreement. These definitions must be clearly defined in the agreement to avoid disputes.

14. Are local entities permitted to create Joint Ventures without foreign companies?

Yes, local entities can form JVs exclusively between Bangladeshi individuals or companies. These partnerships are often created with the goal to maximize resources, expand market reach, and share knowledge within the local market.

15. How is intellectual property (IP) managed in a JV?

The protection of intellectual property rights (IPR) must also be covered in the Joint Venture Agreement. This includes:

• Ownership of patents, trademarks, or copyrights developed during the JV.
• Licensing rights for technology or proprietary processes.
• Disputes related to IP.

16. Can one party withdraw from a JV?

Indeed, withdrawal from a JV is possible, but the process should depend on what is laid out in the Joint Venture Agreement. Common methods include:

• Selling or transferring shares to another partner.
• taking a predefined exit clause.
• Seeking mediation or arbitration for contested withdrawals.

17. What is the difference between a Joint Venture and a Partnership?

Legal Entity: A joint venture is typically set up as a corporation which gives it a separate legal entity. On the other hand, the partnership does not enjoy a separate legal entity, except in the case of registration of the firm under the Partnership Act, 1932.

Duration: JVs are usually for a specific project or time period, whereas partnerships can be open-ended.

Lines of liability: JV companies provide limited liability, whereas, in partnerships, partners are often exposed to unlimited liability.

18. Can a joint venture conduct business under a brand name?

Yes, a JV can operate under a unique brand name. The name must be registered with the RJSC and comply with the Companies Act, 1994. Apart from that, there is also an option to register your trademarks with the Department of Patents, Designs and Trademarks (DPDT).

19. Are JVs in Bangladesh recognized internationally?

Yes, JV companies in Bangladesh are recognized internationally as legal entities. For foreign partnerships, protections are available under bilateral investment treaties (BITs), trade agreements, and compliance with international laws on investment by Bangladesh are available for protection.

20. How can a foreign partner ensure compliance with Bangladeshi regulations?

Foreign partners can ensure compliance by:

• Collaborating with expert legal and business consultants who understand the laws of Bangladesh.
• Registering with BIDA and following foreign exchange rules.
• The RJSC is here to answer these questions and help you with incorporation and compliance requirements.

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