Incorporating a Limited Company in Bangladesh
Incorporating a business in Bangladesh has been simplified over the years due to interventions by the Government. Foreign Investors (“Promoters”) intending to invest in Bangladesh has multiple options to incorporate their business in Bangladesh. Out of these options, registering a limited company is considered as most suitable for long term operation. This Article is designed to guide and assist the Promoters by providing an easy step by step guideline on incorporation of a Company in Bangladesh.
The regulatory authority:
Company is registered under the Companies Act 1994. The Regulatory body for incorporating a company is the Registrar of Joint Stock Companies and Firms (RJSC) which facilitates formation of companies and firms. The body is also responsible for keeping track of all ownership related issues as prescribed by the laws in Bangladesh.
Promoters should keep in mind that except some very exceptional cases, Bangladesh allows incorporation of company with 100% foreign shareholding and no local joint venture is required.
Obtaining Name Clearance:
Firstly, the promoters should fix a desired name for the Company and apply for name clearance in the RJSC server. Upon application, the promoter will receive a Computer Generated Receipt. Investors are required to make payment of the requisite fees to RJSC for name clearance and upon verification; RJSC provides a name clearance certificate to the prospective promoters. This name clearance documents serve as the base for all further processes for company registration.
It is to be noted that the promoters can remotely incorporate a company in Bangladesh through their authorized lawyers/agents in Bangladesh.
Drafting the Memorandum and Articles of Association:
It is of vital importance to draft a solid and consolidated constitution document of the company. The Memorandum of the Company should state the primary business objectives, the amount of paid up capital & authorized capital and state the list of the shareholders along with their respective shareholdings. It is to be noted here Bangladesh does not allow One Person Company (OPC) and minimum two (2) shareholders are required to set up a private limited company. However, in case of public limited company, the total number of shareholders required is seven (7).
The Articles of Association of the Company should include the list & number of the directors, power of the board, power of the Managing Director, meeting process, quorum, notice procedure, appointment of auditors etc. The minimum number of directors for private ltd company is two (2) for public ltd company is three (3).
Directors are required to hold minimum one share (qualification share) in the Company; however the qualification share requirement is relaxed in case Directors who are nominees of corporate entity shareholders. Also it is possible to appoint Independent Directors.
Opening Temporary Bank:
Once name clearance is obtained, a temporary bank account is required to be opened by the proposed company. Along with the name clearance documents, a copy of the Draft Memorandum and Articles of Association needs to be submitted to the respective Banks.
Remitting Money to the Bank Account:
The Foreign Investors are required to remit the desired paid up capital in the bank account of the company. The Bank will hold the remitted amount. Please note that for the legal purposes, there is no minimum capital requirements for setting up a company; however in order to obtain certain advantages including appointing foreign employees, minimum requirement is USD 50,000. Upon remittance of the paid up capital, an Encashment Certificate needs to be obtained from the respective bank.
Submission of Digital Documents:
Upon receipt of the encashment certificate, the Promoters are required to upload a digital copy of the Memorandum & Articles, Directors Consent Forms to the RJSC server. On submission of the documents in the RJSC server, an Electronic Payment Slip will be printed and equivalent amounts need to be submitted to designated bank accounts of RJSC.
Submission of Physical Documents:
Upon payment of fees to the designated bank account for governmental fees and charges as stipulated in the Electronic Payment Slip, non judicial stamp needs to be affixed in the Memorandum and Articles of Association and same need to be submitted to RJSC along with Directors Consent Form (Form IX), List of Consenting Directors ( Firm X), List of Directors and Managing Agents (Form XII); Original copy of the Encashment Certificate and Name Clearance Document and payment slip acknowledged by the Bank.
Obtaining Incorporation Certificate and other Documents:
Within 3-4 working days from submission, the Company will receive Incorporation Certificate, Digital Certified Copy of the Memorandum & Articles of Association and List of Directors (Form XII). Once company receives the Certificates, a copy need to be furnished to the Bank to convert the temporary account to regular account.
Obtain Tax Identification Number (TIN):
In order to start business operations, every company must register for taxes at the appropriate taxation authority (Deputy Commission of Taxes of Company Circle, Zonal Taxation Department) under the National Board of Revenue (NBR) and obtain a tax identification number. Obtaining a Tax Identification number is free of cost and it is done electronically through the NBR server.
Obtaining Trade License:
Companies have to obtain a trade license from the local governmental authorities in Bangladesh. For example, in case of Dhaka, a trade license has to be obtained from respective City Corporation. The proposed company will have to manually file its application at the nearest city corporation office. The cost of obtaining a trade license is approximately USD 200 and it can be renewed on yearly basis. Typical time frame is three-four working days.
Obtaining VAT Registration Certificate:
For VAT purposes, companies register with the Customs, Excise, and VAT Commission under the National Board of Revenue. The company’s VAT is regulated by the Customs, VAT and Excise Department of the region in which it operates. Typical time frame of obtaining VAT registration is about 5-7 working days.
Registering with Bangladesh Investment Development Authorities:
Bangladesh Investment Development Authority (BIDA) is responsible to facilitate foreign investments in Bangladesh. BIDA’s responsibilities include issuing work permits for foreign employees, visa for foreign investors, process loan from foreign sources, approval of remittance of royalties & technical fees, assisting in obtaining industrial plots, facilitating utility connections, approval of foreign loan, suppliers credit and assist and advice on many investment related issues. Foreign Investors with Industrial Projects are strongly advice to register with BIDA upon incorporation of their limited company. However for Commercial or trading Company, there is no requirement for registration with BIDA. Typical time frame for obtaining registration is about 7-10 working days
Important Notes for Foreign Investors:
- The Company Registration costs vary primarily dependent on the authorized capital of the Company. Typical cost is between USD 1800.
- Company needs to have a place of business in Bangladesh and shelf companies are not permitted.
- Bangladesh Forex Rules allows full repatriation of profit and investment.
- Employment of foreign national are allowed at 20:1 (local: expat) ratio, subject to obtaining necessary work permit.
- Except very few limited areas, 100% FDI investment is allowed.
- Directors can be foreign or local national.
- Typical Corporate Income Tax varies between 25%-45%, depending on sector to sector and nature of the Company. However tax holiday is available between 5-7 years for selected sectors and areas.
- Also there are additional fiscal incentives for investing in Special Economic Zones.