Pro-business policy, excellent geolocation, and high investment incentives have made Bangladesh one of the most attractive countries for foreign investors. Over the past few years, the country’s economy has grown steadily and has one of the fastest-growing investment destinations  in the world. 

• Bangladesh received an estimated $3.25 billion of net Foreign Direct Investment (FDI) in 2023, which reflects the growing trust of current investors towards Bangladesh.
• Export earnings exceeded $55 billion in FY 2023 due to RMG and apparel sectors.
• From the year 2010 to 2023, the average GDP growth of Bangladesh was 6.4% per year. To achieve sustainable economic growth, Bangladesh invested in Padma Bridge, various economic zones, and took many other solid attempts.
• Bangladesh was named 2024 “Country of the Year” by The Economist.

Foreign Investment Policies and Laws in Bangladesh

Bangladesh has got a lucrative investment policy and legal environment for the protection of foreign investment as guaranteed by the Foreign Private Investment (Promotion and Protection) Act, 1980. 

• The legal system of Bangladesh provides investment protection.
• Foreign investors enjoy non-discriminatory treatment under the laws of Bangladesh.
• No restrictions on the Repatriation of profits and proceeds from share sales.

Foreign investors may be exempted in other ways if they follow the laws/regulations of Bangladesh Bank and the National Board of Revenue (NBR).

Foreign business registration in Bangladesh—what are the options?

If you plan for a new business or want to expand your business in Bangladesh, you must consider the foreign business structure and business structure and types in Bangladesh to choose the right incorporation model. Each option comes with unique set of benefits that enable businesses to customize strategies based on market conditions & objectives.:

• Fully Owned Foreign Subsidiary offers total control, as the company can be completely owned by foreigners or the parent company.
• Joint Venture – You can enter into a Joint Venture agreement with a local partner, sharing ownership and resources 

With some limited setup resources and investments, investors may wish to consider:

• Bangladesh Branch Office—it is essentially a part of the parent company with limited functionality.
• Liaison or Representative Office—only permitted to perform local research.

Other opportunities include:

• PPP – Public-Private Partnership.
• Franchise operations – Renowned brands can have their presence in Bangladesh.
• Engagement of Agents or Distributors – Companies can appoint Bangladeshi companies as exclusive agents, or nonexclusive agents, or distributors.

For most investors, a wholly foreign-owned subsidiary provides the greatest level of control. However, integrating local partnerships over time can offer strategic advantages.

Key Features of Subsidiaries or Locally Incorporated Companies in Bangladesh

• Distinct Legal Entity- Subsidiaries function independently to safeguard parent resources.
• Full Ownership: foreigners can own the Entire subsidiaries without reserving any shares of the company to any local shareholders.
• Tax benefits: Some of the lucrative incentives being given include a tax holiday & reduced import tariffs & export incentives.
• Cost-Effective Operations: Bangladesh offers competitive labor costs, while the infrastructure costs are also very low.
• Profit repatriation: Bangladesh imposes no restrictions on repatriation of profits/dividends/capital.
• Large Market: Bangladesh, having the eighth largest population, creates a promising market potential with rapid economic growth. 
• Stability/Continuity: The Bangladesh subsidiary is limited by liability and has a perpetual succession, i.e., the death of shareholders does not restrict continued operations.
• Maximized Market Access: Setting up a Bangladesh subsidiary will get early access due to local presence.
• Borrowing Opportunities: Incorporated entities can have access to domestic borrowing options.
• Faster Process — Since there is no requirement of Commencement Certificates, one can start business much faster.
• Expandability: Incorporated entities can have flexibility by having both global and local presence. They can open multiple offices, hire both local and international talents, and expand the business if necessary.

Everything You Need to Know About Registering a Company in Bangladesh

The private limited company is the most flexible, scalable, and forward-looking option when it comes to choosing a business structure. 

The Registrar of Joint Stock Companies and Firms (RJSC) oversees the incorporation and registration of companies. The Companies Act 1994 protects the rights of the investors and empowers directors to run and manage the company properly.

Here’s your step-by-step roadmap to getting started:

Step One: Apply for Name Clearance

Name clearance application to be submitted to RJSC. Each company has to have its own unique name. RJSC will conduct a formal search to verify that your preferred name is unregistered or it doesn’t resemble any other names.

Once the approval is given, pay the required fee to the designated bank.

Step Two: Open a Bank Account

Open a temporary Non-Resident Taka Account (NRTA) in the proposed company’s name at a reputable commercial bank. This account exclusively accepts international remittances and is mandatory for obtaining Bangladesh Bank’s approval.

Deposit the required shareholding amount. For foreign-owned companies, this is typically at least USD 50,000 to meet government regulations for work permits and industrial projects. If the investment does not proceed, the NRTA balance can be repatriated without prior approval, as long as all of the dues have been cleared.

Obtain an Encashment Certificate from the bank, proving the capital has been deposited.

Step Three: Draft and Prepare Documents

Having the proper documents prepared is crucial for ensuring your business is compliant within Bangladesh: 

• Articles of Association (AoA): Defines internal management and governance.
• Memorandum of Association (MoA): Specifies the company’s objectives, operational scope, and authorized capital.
• Other forms and schedules prescribed by RJSC.

Engage experienced legal consultants to ensure your documents are in compliance with Bangladeshi corporate laws and structured to suit your business needs.

Step Four: Submit Documents to RJSC

This step marks the formal application for registering your company. You must pay the prescribed fees and obtain adhesive stamps from the Treasury. These stamps are affixed to the documents to validate them.

Setting up a subsidiary company in Bangladesh involves submitting several key documents to the Registrar of Joint Stock Companies and Firms (RJSC) and other relevant authorities. Here’s a breakdown:

Name Clearance Certificate from the RJSC, confirming the availability of the proposed company name.

Memorandum of Association (MoA)

Describes the purposes, powers, and activities of a company.

Articles of Association (AoA)

Outlines the internal rules, governance structure, and operational procedures for the company.

Shareholder Details

Names, addresses, and identification documents (passports for foreign nationals or national IDs for locals) of all shareholders.

Director Information

Particulars of at least two directors (including names, addresses, identification, and consent to act as directors (Form IX)).

Bank Encashment Certificate

Proof of inward remittance of the minimum required capital (minimum $50,000 for foreign subsidiaries).

Registered Office Documents

Documents of the leased or owned location where registered office premises are situated.

Treasury Challan

Evidence of payment for government stamp duty to the Bangladesh Bank.

Power of Attorney

Authorization for a local representative to act on behalf of the foreign investors during the incorporation process.

Upon successful verification, RJSC shall provide a Certificate of Incorporation, officially establishing your company as a legal entity.

Step Five: Meet Post-Registration Compliance

Getting incorporated is only the beginning. Compliance ensures your business operates smoothly and legally.

Obtain essential licenses, such as:

• Trade License from the local municipal authority.
• Tax Identification Number (TIN) for corporate tax purposes.
• VAT Registration Certificate for businesses involved in taxable activities.
• Fire Certificate or Environmental Clearance (if required for your industry).
• Other licenses and permits should be required according to the business type and industry sector, and as well as the regulations set by the relevant authorities in Bangladesh. For example: i. Manufacturing Sector: Environmental clearance, factory licenses, and fire safety permits; ii. Food Industry: Food safety certification and hygiene permits; iii. Telecommunications: Licenses from the Bangladesh Telecommunication Regulatory Commission (BTRC); iv. Healthcare: Approvals from the Directorate General of Health Services (DGHS); and Import/Export: Import-export registration certificate (IRC/ERC), etc.

Estimated Timeline: The entire registration process, including post-registration compliance, typically takes 2 to 60 days.

Compliance Obligations After Incorporation

Once incorporation is done, subsidiaries have to follow a bunch of rules. These include:

• Holding meetings (both board & general) according to the Companies Act of 1994.
• Doing an audit of accounts each year. This keeps things clear & accurate.
• Keeping a statutory register with important company details like directors, shareholders & charges.
• File annual returns with RJSC and other regulatory authorities.
• Following tax laws. This involves corporate tax filings, VAT returns, AIT etc.
• Comply with labor regulations: employee contracts and the safety of the workplace.

Do I Need to Register with BIDA for a Bangladesh Subsidiary?

Yes, if your subsidiary is a foreign-owned company in Bangladesh, registration with the Bangladesh Investment Development Authority (BIDA) is recommended. While it is not mandatory for all types of subsidiaries, BIDA registration facilitates easier approvals for foreign investment, work permits, and other regulatory benefits.

Prohibited, Restricted, and Regulated Sectors for Foreign Investment in Bangladesh

Prohibited Sectors

There cannot be any Foreign investments in:

• Arms & Ammunition Manufacturing: Think weapons and military stuff.
• Reserved Forest Activities: Natural forests are off-limits.
• Nuclear Energy: This is only for government deals.
• Gambling & Casinos: Absolutely banned.
• Tobacco Processing: Large-scale export is a no-go.

Restricted Sectors

You can invest in these areas but need serious approvals:

• Defense Equipment: The Ministry of Defense has to give the green light.
• Banking: Bangladesh Bank’s clearance is needed.
• Telecommunications: Licenses from BTRC are crucial.
• Deep-Sea Fishing: Must get permits under maritime laws.
• Energy Resources like Gas & Coal: Government approval is strict.
• Media: There are limits to safeguard national interests.

Regulated Sectors

Here investments can happen under certain regulations:

• Mining: Needs Environmental compliance.
• Pharmaceuticals: Controlled by strict rules.
• Agriculture: Should help local livelihoods.

Seventeen controlled sectors need clearance or permission from specific authorities before investing. These include:

• 1. Deep sea fishing
• 2. Private sector banks/financial institutions
• 3. Private sector insurance companies
• 4. Private sector power generation, supply & distribution
• 5. Exploration, extraction & supply of natural gas/oil
• 6. Exploration, extraction and supply of coal
• 7. Exploration, extraction and supply of other minerals
• 8. Large infrastructure projects (example: flyovers, expressways)
• 9. Crude oil refineries
• 10. Industries using natural gas as raw material
• 11. Telecommunication services (both mobile/cellular and landline)
• 12. Satellite channels
• 13. Cargo/passenger aviation
• 14. Sea-bound ship transport
• 15. Sea-port/deep sea-port
• 16. VOIP/IP telephone services
• 17. Industries using heavy minerals from sea beaches

Guidelines for Foreign Investors in Restricted Sectors

For investment in restricted sectors, foreign entities must:

• Get necessary approvals & licenses from the right authorities.
• Follow the Foreign Private Investment Act of 1980 for promotion and protection.
• Stick to guidelines set by Bangladesh Bank as well as local environmental & labor laws.
• Align operations with national policies plus strategic goals.

Considering setting up a subsidiary in Bangladesh? It’s wise to consult with experienced legal & business advisors to navigate complexities—and maximize success! If you need more help, contact – fix@legalbd.com

FAQ on setting up and operating a subsidiary company in Bangladesh:

1. What is a subsidiary company?

A subsidiary company in Bangladesh is a separate legal entity fully owned and controlled by the foreign entity or the holding company, without having any local investor in Bangladesh. 

2. What is the legal structure of a subsidiary in Bangladesh?

A subsidiary is treated as an independent legal entity and often operates as a private limited company under the Companies Act, 1994.

3. What is the minimum number of directors and shareholders required?

The Bangladesh subsidiary must have a minimum of the 2 and a maximum of the 50 shareholders and directors for a private limited company.

4. Are there restrictions on foreign ownership?

In most sectors, foreign companies can own up to 100% of a subsidiary. However, certain sectors like telecommunication or defense may have restrictions under the Bangladesh Investment Development Authority (BIDA).

5. What are the tax obligations for a subsidiary?

A subsidiary is considered a separate taxable entity and must:

• File annual tax returns
• Pay corporate taxes (usually 27.5% for non-public companies)
• Withhold and remit taxes on salaries and payments
• Pay VAT, if applicable

6. Is a subsidiary eligible for tax holidays or exemptions?

Yes, subsidiaries operating in priority sectors or certain regions may benefit from tax holidays, reduced taxes, or exemptions under government incentives.

7. What are the Corporate Tax Rates in Bangladesh:

• Listed Companies (Stock Market): 25%
• Private Companies: 27.5%
• Public Banks, Insurance, and Financial Institutions: 37.5%
• Private Banks, Insurance, and Financial Institutions: 40%
• Public Mobile Network Operators: 40%
• Private Mobile Network Operators: 45%
• Cigarette Manufacturers (Both Public and Private): 45%
• One-Person Company: 25%

8. Can a subsidiary repatriate profits?

Of course, subsidiaries can repatriate dividends and profits to the parent company after meeting tax obligations and other regulatory requirements.

9. Are there restrictions on repatriation of capital and dividends?

No, subsidiaries can freely repatriate capital, dividends, and profits to the parent company, provided they comply with tax laws and after getting approval from Bangladesh Bank.

10. Can a subsidiary run multiple business activities?

Yes, the Memorandum of Association (MoA) allowed those business activities. Any other activity outside the MoA will need an amendment by way of Court order and RJSC approval.

11. Is a subsidiary eligible for incentives under Export Processing Zones (EPZs)?

Yes, subsidiaries operating in EPZs benefit from tax exemptions, duty-free imports of raw materials, and other incentives.

12. Can a subsidiary have local shareholders?

Yes, a subsidiary can have local and foreign shareholders depending on the business sector and relevant regulations.

13. What happens if a subsidiary fails to comply with filing requirements?

Non-compliance can lead to penalties, suspension of the business license, or legal action against directors.

14. What responsibilities does the parent company have for the subsidiary?

The Bangladesh subsidiary will not be liable to the parent, holding company as the subsidiary itself is a separate legal entity. But the parent company must ensure:

• subsidiary complies with local laws.
• Ensure provision of the capital and other resources that are agreed.
• Oversee and review economic and operational activities.

15. What are the labor laws applicable to subsidiaries?

Subsidiaries must comply with the Bangladesh Labor Act, 2006, which covers:

• Minimum wage requirements
• Working hours and overtime
• Employee benefits (e.g., provident fund, gratuity)
• Termination and severance rules

16. Can a subsidiary hire foreign employees?

Yes, a subsidiary can hire foreign employees, if they obtain a work permit through BIDA. The hiring must follow a 5:1 ratio of local to foreign employees.

17. How can a subsidiary be dissolved?

To dissolve a subsidiary, you must:

• Notify the RJSC and file for voluntary liquidation.
• Pay off all debts, tax liabilities and employee benefits.
• Distribute remaining assets to shareholders.

18. What is the procedure for winding up a subsidiary?

To dissolve a subsidiary:

• Submit a resolution to the RJSC for commencement of voluntary liquidation.
• Appoint a liquidator to settle liabilities and distribute assets.
• Get tax clearance from the National Board of Revenue (NBR).
• Submit final accounts and liquidation reports to the RJSC.

19. Can a subsidiary apply for loans in Bangladesh?

Yes, Bangladesh subsidiaries can get access to bank finance from local or international banks. 

20. What happens if the subsidiary fails to repay its debts?

All possible legal actions may be taken as per law. The Bank and financial institutions will exercise laws for Artha Rin (Money loan) Court and civil and criminal actions whereas other lenders will take other civil and criminal actions against the subsidiary. The subsidiary’s assets may be liquidated to settle debts. The parent company is not liable unless provided guarantee or otherwise specified in contracts.

21. Can a subsidiary operate as a non-profit organization in Bangladesh?

Yes, a subsidiary can be set up as a non-profit organization, but it must register under the Societies Registration Act, 1860 or the Trust Act, 1882 and follow separate compliance rules. check our non-profit guide.

22. What are the Key Rules, guidelines, acts, Circulars & regulations applied to foreign investments in Bangladesh. [check our foriegn investment policy guide]

• Foreign Private Investment (Promotion and Protection) Act, 1980: This act ensures that foreign investors receive fair treatment & also guarantees that they can send their capital and profits back home.
• Bangladesh Export Processing Zones Authority Act, 1980: Governs how businesses operate within Export Processing Zones (EPZs) & offers incentives.
• Bangladesh Economic Zones Act, 2010: Allows for setting up & managing Economic Zones, giving various incentives to attract investment.
• Companies Act, 1994: Regulates the formation, running & winding up of companies in Bangladesh.
• Bangladesh Investment Development Authority (BIDA) Act, 2016: Establishes BIDA, which helps promote & facilitate investments in Bangladesh—including those from foreign investors.
• Income Tax Ordinance, 1984: Details tax liabilities and offers incentives for both local & foreign businesses.
• Value Added Tax (VAT) and Supplementary Duty Act, 2012: Governs VAT and other related duties on businesses.
• Bangladesh Labour Act, 2006: Sets the rules for employment conditions like wages, work hours & worker rights.
• Customs Act, 1969: Provides a framework for goods import/export—including customs duties & exemptions.
• Foreign Exchange Regulation Act, 1947: Controls foreign exchange deals aiming to manage foreign investments better.
• The Arbitration Act, 2001: Promotes arbitration for resolving disputes including those involving foreign investors.
• Environment Conservation Act, 1995: Makes sure investments follow environmental standards and rules.
• Securities and Exchange Ordinance, 1969: Regulates the securities market—including issuance & trading by foreign entities.
• The Public-Private Partnership (PPP) Act, 2015: Offers a framework for public-private partnerships to bolster public infrastructure investment.
• Investment Promotion and Financing Facility (IPFF) Project: Offers guidelines under this project to support infrastructure investment in Bangladesh.
• Bangladesh Bank Circulars & Guidelines: Contains various circulars from the Bangladesh Bank affecting transactions with foreign exchange, financing investments & banking operations tied to foreign ventures.
• The Bangladesh Investment Development Authority Act of 2016 was issued by what used to be the Board of Investment—now a part of BIDA—to give detailed procedures necessary for foreign investors.

23. Establishing a Subsidiary Company in Bangladesh: The Disadvantages 

• Regulatory Complexity : Navigating Bangladesh’s legal framework may prove challenging.
• Lengthy Setup Process : Getting all your licenses and registrations can take anywhere from 5 to 60 days.  There could be delays in operations due to this.
• Inward Remittance Requirement : Foreign affiliates in Bangladesh must also have inward remittance of at least $50,000 for visa and foreign employees.
• Labor Rules: There is a requirement of 1:5 foreign to local worker ratio.  Exceptions may be made with prior approval.
• Restricted Sectors : There are sectors that are off-limits, such as defense, nuclear energy & forestry.
• Infrastructure Issues : Power outages & transportation delays may cause problems.
• Cultural Barriers : Language and market practices may become difficult aspects to understand.
• Foreign Exchange Hurdles : The Bangladesh central bank regulates foreign exchange.  There may be delays to receive regulatory approvals before transferring funds.
• Dependence on Local Networks : While not required, a lot of success can come from working closely with the local suppliers or distributors.

These laws form a thorough legal setup facilitating & regulating foreign investments within the country of Bangladesh.

WHY WORK WITH US? 

Our team is expert in foreign investment rules in Bangladesh. 

• Comprehensive Services span from entry strategies and funding solutions to repatriation routes and ensuring regulatory compliance; we offer start-to-finish services.
• Efficiency and accuracy are key! We make processes simpler—thus minimizing administrative loads—and guarantee timely compliance.
• Personalized Solutions mean our services are custom-made to fit each client’s specific needs properly—ensuring successful business flow.

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