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Company registration in Bangladesh.
Barrister Tahmidur Rahman
There are numerous reasons why Bangladesh is quickly becoming one of the world’s most promising emerging markets. Bangladesh’s openness to foreign investment, competitive labor costs, and rapid economic growth are among the top reasons. Before investing, it is crucial to know the legal entities available to foreign investors. This article will inform you about company registration in Bangladesh.
Can foreign investors incorporate a company in Bangladesh?
Bangladesh is very open to foreign ownership, with most sectors allowing up to 100% foreign ownership. However, in some sectors, prior approval from the government is required, and a few sectors restrict both domestic and foreign investment. Other advantages include the right to purchase land and property in the company’s name, tax breaks, and so on.
Minimum required capital
In Bangladesh, there is no set minimum capital requirement. Because of this, $1 is regarded as the minimal capital investment. Investors should be aware that if they plan to engage foreign workers, they must remit at least $50,000 in their own country.
The step-by-step procedure for registering a company in Bangladesh
The governing body:
Under the Companies Act of 1994, the company is registered. The Registrar of Joint Stock Corporations and Firms (RJSC), which enables the formation of companies and firms, is the regulatory agency for establishing a company. According to Bangladeshi legislation, the authority is also in charge of keeping track of all ownership-related matters.
How to Get Name Clearance:
The promoters should first decide on the desired name for the company and submit an application for name approval on the RJSC system. The promoter will get a computer-generated receipt after applying. Investors must pay the necessary fees to RJSC for name clearance, and after verification, RJSC gives a certificate of name clearance to the potential promoters. These name approval documents serve as the foundation for all subsequent company registration operations.
It should be noted that promoters can remotely incorporate a company in Bangladesh through their authorized Bangladeshi lawyers/agents.
Making a Memorandum of Association:
The creation of the company’s stable and comprehensive constitution is crucial. The primary business objectives, the approved and paid-up capital levels, and a list of the shareholders with their respective shareholdings should all be stated in the company’s memorandum. It should be mentioned that Bangladesh does not permit One Person Companies (OPCs), and a private limited company must have at least two (2) shareholders in order to be established. However, a public limited company must have a minimum of seven shareholders in order to be formed. Recently, the government has also permitted the establishment of one-person businesses; you can read more about this topic in our article.
The Company’s Articles of Association should include the list and number of directors, the power of the board, the power of the Managing Director, the meeting process, quorum, notice procedure, auditor appointment, and so on. The minimum number of directors for a private limited company is two (2), while the minimum number of directors for a public limited company is three (3).
Directors must own at least one share (qualification share) in the company; however, this requirement is waived for Directors who are nominees of corporate entity shareholders. Independent Directors can also be appointed.
Creating a bank account
The proposed corporation must open a temporary bank account after obtaining name clearance. A copy of the draft memorandum and articles of association must be sent to the appropriate banks together with the name clearance paperwork.
Transferring Funds to the Bank Account:
Foreign investors must deposit the desired paid-up capital into the company’s bank account. The remitted sum will be kept by the Bank. Please be aware that there is no minimum capital need for forming a corporation for legal purposes; nonetheless, there is a minimum requirement of USD $50,000 in order to qualify for some benefits, such as hiring foreign workers. It is necessary to obtain an Encashment Certificate from the relevant bank after sending the paid-up capital.
If there are only Bangladeshi citizens among the stockholders, this rule does not apply.
Digital Document Submission:
Following receipt of the encashment certificate, the Promoters must upload a digital copy of the Memorandum and Articles, as well as the Directors Consent Forms, to the RJSC server. After submitting the documents to the RJSC server, an Electronic Payment Slip will be printed, and equivalent amounts must be submitted to RJSC’s designated bank accounts.
Physical Document Submission:
Following payment of fees to the designated bank account for governmental fees and charges as specified in the Electronic Payment Slip, a nonjudicial stamp must be affixed to the Memorandum and Articles of Association and submitted to RJSC along with the Directors Consent Form, List of Consenting Directors, List of Directors and Managing Agents; original copy of the Encashment Certificate and Name Clearance Document and payment slip acknowledged by the bank.
Obtaining the Certificate of Incorporation and Other Documents:
The Company will receive the Incorporation Certificate, Digital Certified Copy of the Memorandum & Articles of Association, and List of Directors within 3-4 working days of submission. Once the company receives the Certificates, a copy must be provided to the bank in order for the temporary account to be converted to a regular account.
Apply for a Tax Identification Number (TIN):
Every firm must register for taxes and get a tax identification number from the relevant taxing authority (Deputy Commission of Taxes of Company Circle, Zonal Taxation Department) under the National Board of Revenue (NBR) before it may begin conducting business. A Tax Identification Number can be obtained electronically via the NBR system and is free of charge.
Getting a Trade License:
In Bangladesh, businesses must obtain a trade license from the local government. In the case of Dhaka, for example, a trade license must be obtained from the City Corporation. The proposed company must file its application in person at the nearest city corporation office. A trade license costs approximately USD 200 and can be renewed on a yearly basis. Three to four working days is a typical time frame.
Obtaining a Certificate of VAT Registration:
Companies must register for VAT with the Customs, Excise, and VAT Commission, which is part of the National Board of Revenue. The VAT of the company is governed by the Customs, VAT, and Excise Department of the region in which it operates. Obtaining VAT registration usually takes about 5-7 working days.
Creating an account with the Bangladesh Investment Development Authority:
Foreign investment facilitation in Bangladesh is the responsibility of the Bangladesh Investment Development Authority (BIDA). The duties of BIDA include providing work visas for foreign workers, foreign investor visas, processing loans from foreign sources, approving the remittance of royalties and technical fees, helping to obtain industrial plots, facilitating utility connections, approving foreign loans, approving supplier credit, and providing assistance and advice on numerous investment-related issues.
When a limited company is formed, foreign investors with industrial projects are highly encouraged to register with BIDA. However, registration with BIDA is not necessary for commercial or trade companies. It typically takes 7 to 10 business days to receive registration.
Important reminders for Foreign Investors:
Shelf companies are not permitted and must have a physical presence in Bangladesh.
Forex regulations in Bangladesh permit the full repatriation of earnings and investments.
Employment of foreign nationals is permitted at a 20:1 (local: ex-pat) ratio, provided that the required work permit is obtained.
With very few exceptions, 100% FDI investment is permitted.
Directors may be from abroad or within the country.
Typical corporate income tax rates range from 25% to 45%, depending on the sector and type of business. For some sectors and areas, the tax holiday is offered for 5-7 years.
Investments in Special Economic Zones are also eligible for further financial benefits.
Sole Proprietorship business:
A sole proprietorship, as opposed to a private limited company or a partnership, has a simpler business structure and fewer compliance requirements. Any Bangladeshi citizen over the age of 18 may register as a sole proprietor. The owner of a sole proprietorship has complete control over all aspects of the business, and all profits are considered personal income. A sole proprietor’s profits are taxed as personal income. The sole proprietor only needs to obtain a trade license and renew it once a year.
However, in sole proprietorship, the owner and the business are not considered separate legal entities and therefore its owner is personally liable for all liabilities incurred. Therefore, creditors may sue sole proprietors for any unpaid debts and obtain an order to claim against personal assets. Further, as a sole proprietor, it is more difficult to finance the business as it is limited to personal finances. As the business is subject to personal taxes, sole proprietors are not eligible for corporate tax benefits or incentives.
For foreign investors, sole proprietorship is not an option. Foreign investors should think about opening a locally registered company, a branch office, or a liaison office.
As a sole proprietor, one must provide the following details and paperwork to BIDA:
1. The Bangla version of the proposed business name
2. Details about its main business activities
3. Local business address in any commercial area for the proposed business
4.Title deed or lease/rent agreement for the office address
5. Owner's National ID Copy
Partnership is defined in Section 4 of the Partnership Act 1932 as “the relation between persons who have agreed to share profits of a business carried on by all or any of them acting for all.” A partnership must have at least two partners and a maximum of twenty partners.
Partners can be individuals or businesses. Partnerships, as opposed to sole proprietorships, are more capable of raising funds because they can pool their assets together. Partnerships, unlike corporations, do not require the appointment of directors, secretaries, or shareholders. As a result, the partners have greater control over the business’s affairs and full ownership. Partners, on the other hand, are jointly and severally liable for the partnership’s debts.
Although registration of partnerships is not legally required, Section 69 outlines various restrictions on unregistered partnerships in the enforcement of rights. According to Section 69(1) of the Act, unless the partnership is registered, no proceedings may be instituted in any Court by a partner against another partner or the firm in connection with enforcing a contractual right.
Furthermore, Section 69(2) states that unless the firm is registered, no proceedings may be instituted in any Court by or on behalf of the partnership against a third party in connection with enforcing a contractual right. therefore, registering the partnership with the RJSC would be most advantageous in order to conduct business in Bangladesh without significant restrictions. Typically, the registration procedure can be finished in 1-2 days.
Step 1: Obtain a Name Clearance from the RJSC. In addition to selecting a partnership name that is not similar to any existing name in their database, the Act contains provisions of additional restrictions. According to Section 58 of the Act, the partnership name should not contain any of the following:
- “Words conveying or indicating the sanction, approval, or patronage of the Government or of the Bangabandhu, unless the Government signals its authorization to use such words as part of the firm name by order in writing.”
- “A corporate name shall not, without the prior written consent of the Secretary-General of the United Nations, contain the name of the “United Nations” or its acronyms by use of its initial letters or of any subsidiary body established by that body.”
- Unless it has received the Director-prior General’s written consent, a company name may not include the name of the “World Health Organization” or its acronyms through the use of its beginning letters.
Step 2: Create a Partnership Contract. Although the Act allows a partnership to be formed without a partnership agreement, it is a required document for registration. The partnership agreement should be printed on a stamp, signed by all partners, and notarized in accordance with the Stamp Act. A partnership agreement must include the following information:
- The firm’s name and address, as well as the names and addresses of all the partners
- Nature of Business
- Business Start Date
- The duration of the partnership and whether it is fixed or indefinite
- Business Location
- Profit distribution among partners
- Each Partner’s Capital Contribution
- Regulations regarding the admission of new partners, the retirement of partners, and the death of partners
- Any other additional clauses
Step 3: Sign a partnership agreement with RJSC. And after that, the partnership agreement and the Declaration on Registration (Form I) must be submitted to the RJSC. If the RJSC is satisfied that all required information has been provided, a Certificate of Registration will be issued.
How does a company get incorporated in Bangladesh under the Companies Act?
A local address must be given as the company's registered address in order to register a company in Bangladesh. The registered address cannot be a P.O. Box and must be a physical location (it may be either a residential or business address). Association's Memorandum and Articles.
What is the procedure for registering a company form?
Company Formation Procedures:
1.Select and Reserve a Company Name
2.Create a Business Entity.
3.Get a Federal EIN.
4.Understand Your State Tax Registrations.
5.Obtain business licenses and tax permits.
6.Make an application for and register your trademark and business mark.
7.Annual filings and permit renewals must be completed.
In Bangladesh, how long does it take to register a company?
In Bangladesh, full registration is anticipated to take 45–60 days on average.
How can I establish a company in Bangladesh?
The Bangladeshi company formation procedure consists of three steps, which are as follows: a) Name clearance; b) opening a bank account and transferring the paid-up capital to Bangladesh; and c) company registration Step b is only applicable if the proposed company has any foreign shareholders.
Who can be a company's director in Bangladesh?
Only natural persons can be appointed as directors in Bangladesh, according to the Companies Act of 1994. It also requires at least three directors for a public company and two directors for a private company.
In Bangladesh, who issues the certificate of incorporation?
After completing all of the formalities, a certificate of incorporation must be obtained from the RJSC.
How many people can form a company?
A minimum of two directors and two members are required in a private company, while a minimum of three directors and seven members are required in a public company.
Can a single person form a limited company?
A limited company can be formed by a single person who will be the sole shareholder and company director, or by a group of people.
What documents are required for company formation?
All directors must provide a self-attested PAN card. All directors must provide self-attested ID proof (driver's license/passport/voter ID). Address Proof (Electricity Bill/Recent Bank Statement/Mobile Bill) (not older than 2 months) Proof of Registered Office Address (Rent Agreement/Lease Deed/Sale Deed)
Is it possible for a foreigner to own a business in Bangladesh?
Foreigners are permitted to invest privately in all industries except defense, nuclear energy, mining, and forest plantation. Foreign direct investment (FDI) has benefited key sectors such as garment and textiles, agribusiness, energy, IT and outsourcing, and infrastructure.