Foreign Investment and Private Limited Company Requirements

Foreign investors seeking to establish operations in Bangladesh are required to incorporate a Private Limited Company (PLC) as their primary business entity. Bangladesh maintains an open investment environment, and there are no restrictions on foreign equity participation 100% foreign ownership is permitted in all sectors except a few reserved industries, which include:

• Arms, ammunition, and other defense equipment or machinery
• Production of nuclear energy
• Security printing (such as currency notes) and minting
• Air transportation (including GSA services) and railways.

1. Legal Protection for Foreign Investors

Foreign investment is safeguarded under the Foreign Private Investment (Promotion and Protection) Act, 1980, which ensures protection against expropriation. In the unlikely event that an investment is subject to any measure amounting to expropriation, the investor is entitled to fair market-value compensation, which is freely repatriable. Notably, Bangladesh has recorded no incidents of expropriation since the enactment of this law.

2. Regulatory Framework

Private limited companies operate under the Companies Act 1994 and are overseen by the Registrar of Joint Stock Companies & Firms (RJSC). Key structural requirements include:

• Shareholding:
  • Minimum shareholders: 2
  • Maximum shareholders: 50
  • Both local and foreign institutions and associations may subscribe to shares.
  • Public invitations to subscribe to shares or debentures are prohibited unless the company converts into a public limited company.
• Directorship:
  • Minimum directors: 2
  • Directors may be residents or non-residents but must be individuals.
• Capital Requirements:
  • There is no minimum requirement for authorized or paid-up capital.
  • Investors may determine the capital structure based on business needs; government fees are calculated according to the chosen capital amounts.
• Registered Office:
  • Every private limited company must maintain a registered office in Bangladesh.

Branch and Liaison Offices

Foreign companies that are not legally registered in Bangladesh may establish a presence through either a Branch Office (BO) or a Liaison Office (LO). These entities allow foreign organizations to operate in Bangladesh without forming a separate local company.

1. Regulatory Oversight

Branch and Liaison Offices are regulated by:

• Bangladesh Investment Development Authority (BIDA)
• Bangladesh Bank

All activities of these offices must strictly align with the scope of work approved by BIDA.

2. Permissible Activities

• Both Branch and Liaison Offices may conduct activities directly related to the parent company’s core business.
• Local revenue generation is prohibited, except where branch offices obtain a special waiver from the relevant authorities.
• Outward remittances are generally not allowed.

3. Financial Requirements

• A minimum inward remittance of USD 50,000 must be brought into Bangladesh within 2 months of approval to meet operational expenses.
• These offices may maintain a foreign currency account in Bangladesh.
• Bangladesh Bank must be notified for the opening of any bank account.

4. Approval and Validity

• BIDA typically grants permission for a period of 3 years, which may be renewed upon application.
• Security clearance from the Ministry of Home Affairs is mandatory for liaison offices engaged in government-related projects.

5. Legal Status and Responsibilities

• A Branch or Liaison Office does not constitute a separate legal entity.
• The parent company remains fully liable for all operations, obligations, and liabilities of its Bangladesh office.

6. Employment Requirements

• For industrial undertakings, the minimum ratio of local to foreign employees must be 20:1.
• For commercial offices, the required ratio is 5:1.

A. Company Incorporation Process.

1. Name Clearance
   Obtain name clearance from RJSC. Certain terms (e.g., “bank,” “investment,” “telecommunication”) require prior approval. Clearance is valid for 30 days.
2. Registered Address
   Provide a valid commercial address as the registered office. Rented, owned, or virtual offices are acceptable.
3. Shareholder Details
   • Institutional shareholders: Name, address, incorporation details, registration number, and MoA/AoA (with certified translations if not in English).
   • Individual shareholders: Personal details, NID/Passport, E-TIN (if local), contact information, and photographs.
4. Capital Structure
   Determine authorized and paid-up capital. No minimum requirement; government fees depend on selected capital.
5. Form IX – Director Consent
   Obtain consent from proposed directors to act as directors.
6. Form XII – Director Particulars
   Provide all required director information and supporting documents.
7. Bank Account Opening
   Open an account with a scheduled bank using name clearance, promoter resolution, draft MoA/AoA, and other required documents.
8. Paid-up Capital Remittance
   Shareholders remit the subscribed capital in BDT to the company’s bank account.
9. Encashment Certificate
   The bank issues an encashment certificate confirming receipt of remitted capital.

10. RJSC Filing
    Submit all incorporation documents to the Registrar of Joint Stock Companies & Firms (RJSC) for company registration.

B. Incorporating a Branch or Liaison Office

1. Application Form
   Submit the prescribed BIDA application form, duly completed.
2. Organizational Set-up & Activities
   Provide the proposed organizational structure and a clear description of activities to be carried out in Bangladesh.
3. Registered Address
   A valid commercial address (owned, rented, or approved commercial space) must be provided as the registered office.
4. Parent Company Documents
   Submit the following:
   • Memorandum & Articles of Association
   • Certificate of Incorporation
   • Board resolution approving establishment of the BO/LO
   • Particulars of directors (name, nationality, address)
   • Audited financial statements for the most recent fiscal year
5. BIDA Submission & Capital Remittance
   All documents must be submitted to BIDA along with the application. Upon approval, BIDA typically requires remittance of USD 50,000 to the BO/LO’s bank account within 2 months to cover establishment and initial operating expenses.

Failure to remit within the deadline may result in a 5% additional remittance requirement per month.

1. Document Attestation
   Certain parent company documents must be attested by the Bangladesh Embassy in the home country.

Mandatory Registrations (Applicable to All Entities)

1. Electronic Tax Identification Number (e-TIN)

All entities must register with the National Board of Revenue (NBR) to obtain an e-TIN.
Requirements:

• Valid Bangladeshi mobile number

• Company Incorporation Number

• Registered business address

2. VAT/BIN Registration

Entities must obtain a Business Identification Number (BIN)/VAT registration from NBR.
Required documents include:

• Bank certificate

• Company Incorporation Number

• Directors’ information

• General company details

3. Trade License

A Trade License must be secured from the respective City Corporation to conduct business in Bangladesh.
Key points:

• Issued in the name of a Managing Director or Director

• For incorporation, the license holder must be a Bangladesh resident (employee or authorized representative)

• Renewable annually in June

Required documents:

• MoA & AoA

• Certificate of Incorporation

• e-TIN Certificate

• Rental agreement

• Name and address of the Director/Managing Director

• Appointment and authorization letters (if held by an employee)

• Two passport-size photographs

Foreign Exchange (FOREX) Implications

1. Overview of the Foreign Exchange Framework

Bangladesh operates a regulated foreign exchange environment, with key policies designed to support investment while maintaining prudent capital controls.

• Since March 24, 1994, the Bangladeshi Taka (BDT) has been convertible for all current account transactions under Article VIII of the IMF Articles of Agreement.
• Foreign investors are generally free to invest in industrial enterprises, either wholly owned or in joint ventures with local partners, except for a small number of restricted sectors.
• Non-resident individuals and institutions may invest in shares listed on Bangladeshi stock exchanges using foreign currency brought into the country.
• Foreign investors may also be allotted shares in private limited companies through approved investment channels.
• Non-resident shareholders are permitted to transfer shares to other non-residents without restriction.
• While inward investment is encouraged, outward remittances from Bangladesh remain tightly regulated, with limited approved channels.

2. Dividend and Profit Repatriation

• Companies may freely remit post-tax dividends to non-resident shareholders upon submission of required documents to their authorized dealer bank, in accordance with Bangladesh Bank regulations.
• Branches of foreign companies may also remit profits to their parent entity, subject to documentation and approvals from Bangladesh Bank and BIDA (Bangladesh Investment Development Authority).
• Dividends and capital gains arising from investments made through a Non-Resident Investor’s Taka Account (NITA) can be freely repatriated.
• Sale proceeds from shares in private limited companies require prior approval from Bangladesh Bank, though dividend remittances do not require such approval.

3. Royalty, Technical Know-How, Technical Assistance & Franchise Fees

• Payments for royalty, technical assistance, technical know-how, and franchise fees can be remitted abroad upon approval from BIDA.
• Companies seeking to remit such fees must be registered with BIDA prior to initiating the process.
• Authorized banks will process the remittance upon receiving valid BIDA approval and supporting documentation.

4. Training & Consultancy Payments

• Training and consultancy fees may be remitted without prior approval from Bangladesh Bank.
• These remittances are subject to a cap of 1% of annual sales, based on sales figures declared in the previous year’s income tax return.

5. Expatriate Employee Remittances

• Expatriate employees in Bangladesh may remit up to 75% of their net income abroad at any time during the year, subject to available funds in their bank accounts.
• For this purpose, net income refers to gross earnings minus mandatory deductions, including income tax, provident fund contributions, pension fund, house rent deductions, and other fixed statutory deductions.