Branch office 

A Branch office is considered as a country office of a foreign entity. Branch office is restricted to undertake any business activity in Bangladesh and cannot have any income in Bangladesh. However, there are options to extend the parameters of Branch office, whereby Branch Office can with due pre-consent from BIDA engage into commercial activities. One of the two choices that are open to foreign investors looking to begin operating in Bangladesh is a branch or liaison office. 

 

Branch office in Bangladesh: Key Information

 

Liaison Office

A Liaison Office [also known as representative office] can undertake only liaison activities i.e. it can act as a channel of communication between Head Office aboard and parties in Bangladesh. It is not allowed to undertake any business activity in Bangladesh and cannot have any income in Bangladesh.

 

Liaison office in Bangladesh: Key Information

 

 

Subsidiary 

A subsidiary is a distinct legal entity that a parent company owns a majority of. It runs separately from its controller and has its own board of directors. The parent company, which may be fully or partially owned, retains a controlling interest in its subsidiaries. 

 

Choosing a structure for your business 

 

A major decision that you will have to make when starting a company is how it will be structured. The size, nature, and desired management style of your organization will determine the structure you select. In order to choose an appropriate business structure, a comparison needs to be made between branch liaison and subsidiary companies. The comparisons between branch liaison and subsidiary company given below: 

 

SL No. Key points  Branch  Liaison/Representative office  New Company /Subsidiary  Comment 
1.  Purpose  To carry out commercial activities in Bangladesh. To promote and facilitate business activities of the parent company Subsidiaries can operate independently to achieve the objectives of the parent company

 . 

2.  Paid-up capital  A branch office does not need paid-up capital. no minimum paid-up capital is required Paid- up capital can be increased any time following the incorporation of a company in Bangladesh.
3.  Initial investment Requirement The parent company must invest no less than USD 50,000 or 6(six) months of operational costs with the expense of initial office set-up cost included. Initial cash is required, normally at least USD 50,000 No minimum capital is required to set up a subsidiary
4.  Type of Business Entity  A Branch Office is a proper legal entity after it is registered with the BIDA in Bangladesh. A Liaison Office is a proper legal entity after it is registered with the BIDA in Bangladesh. Separate legal entity from its parent company; However, branch and liaison office are seen as extensions of foreign companies rather than separate legal entities.
5.  Permission  Requires permission from BIDA  Requires permission from BIDA from the Bangladesh Bank   The proposed company name needs to be cleared—that is, approved by RJS before incorporation. 
6.  Licensing  Renewal of trade license, IRC & ERC; Renewal of trade license Renewal of trade license, IRC & ERC;
7. local revenue sources A Branch office may have a local source of income from the approved field of business activities in Bangladesh.  In Bangladesh, a liaison or representative office will be without any local revenue sources. The parent company operating the liaison or representative office required to pay all setup and operational costs, including the salary of the local employee and expatriates.
8.  Income generative operation  Income generated is subject to approval by BIDA  The parent company has to bear all operational expenses of the liaison office in Bangladesh Allowed to generate income, incur expenses out of income. 
9.  Taxation  Subject to corporate tax in Bangladesh.  Not subject to corporate tax in Bangladesh  Full-fledged corporate taxation 
10.  Outward remittances  Allowed direct involvement and earning of commission through import and export activities Outward remittances are only allowed if the money is brought in from abroad and remains unused. 
11.  Memorandum and Articles of Association  No separate constitution/MOA/AOA from the foreign company No separate constitution/MOA/AOA from the foreign company Having its own constitution/MOA/AOA; The Branch and Liaison Office do not have their own separate Memorandum and  Articles of Association
12. Employment  Hires employees under the parent company’s terms and conditions Hires employees under the parent company’s terms and conditions Hires employees under the company’s terms and conditions
13.  Registration  Requires to be RJSC registered. Requires to be RJSC registered. Requires to be RJSC registered. A fee is applicable for the registration of commercial office along with 15% VAT imposed by Government of Bangladesh.   
14. Required Documents 
  • Application for the formation of a branch office in the approved manner, signed by the appropriate person.
  • The parent company’s memorandum, articles of association, and certificate of incorporation.
  • Name and nationality of the parent company’s promoters and directors.
  • Accounts of the parent   company’s most recent fiscal year that have been audited.
  • Resolution of the Board of Directors of the company approving the establishment of an office in Bangladesh.
  • Office’s proposed organogram indicating the positions that will be held by both expatriates and local staff.
  • Details of the activities to be carried out by the proposed Bangladesh branch office, or representative office 
  • Forwarding Letter to the BIDA.
  • Foreign Company Incorporation Certificate.
  • Memorandum and Article of Association (AOA).
  • Audited Financial Statements of the Foreign Parent Company. (Previous Two Years)
  • Board Resolution for Liaison Office set-up in Bangladesh.
  • Information of Directors.
  • Complete Details of the Shareholders of the Applicant Company.
  • Declaration That Details the Nature of the Activity of the Parent Company.
  •   Declaration That Details the Nature of the Activity of the Proposed Liaison Office.
  • The Employee List of the Proposed Liaison Office. 
  • Authorization Letter of the Consultant who will Process the Application on Behalf of the Applicant.
  • Name Clearance Certificate from RJSC
  • Information of directors Business Address register.
  • TIN Document (Taxation Identification Number).
  • Information of Shareholders.
  •  Information of foreign shareholders with passports.
  • IX-information
    All the partners must sign Major statements.
    Information about the principal place of the corporation 
15. Trade License  required to apply for a trading license from the local government required to apply for a trading license from the local government The Trade License can be obtained from any local government body (City Corporation or Pouroshova). 

 

16.  Commercial activities  It allows a foreign company to carry out commercial activities within Bangladesh. Commercial operations by a liaison office are not permitted in Bangladesh. As commercial activity is unrestricted, it is permissible to do any form of business that is independent of the parent company. 
17.  Liability  Fully liable for debts and obligations in Bangladesh. Not liable for debts and obligations in Bangladesh. Shareholders of Subsidiary company has limited liability
18.  Validity  Till the validity of BIDA permission period Till the validity of BIDA permission period Till company is closed

 

You may be wondering which option is better for your growing company now that you know the difference between a branch, liaison and a subsidiary. You should assess your business needs in order to decide which business structure is suitable. 

Whichever will best serve your business’s needs should be taken into consideration when comparing a branch liaison and a subsidiary Company. 

 

Disclaimer: Consult a relevant professional’s advice prior to making any decisions based on this article. 

 

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