Legal Structures
A private limited company is the most common form of business entity for foreign investors.
Other than that, they can setup branch or liaison offices.
Foreign Investment Overview
- There is no general restriction on equity participation or acquisition of property for a foreign
entity. - There is no limitation on equity participation for foreign companies in Bangladesh; wholly
owned investment is allowed in all industries except reserved ones. - Foreign investors may invest in shares and securities quoted on local stock exchanges with
foreign currency sent or brought into Bangladesh
Limited Liability Company
- Foreign investors will have to incorporate a “Private Limited Company” in Bangladesh.
- There is no limitation on equity participation for foreign companies in Bangladesh; wholly owned investment is allowed in all industries except the following reserved ones**:
- Arms, ammunitions and other defence equipment and machinery.
- Production of nuclear energy.
- Forest plantation and mechanized extraction within bounds of reserved forests.
- Security printing (currency notes) and minting.
- Air transportation(includingGSA services)and railways.
**Foreign investment in above industries may be possible with prior approval/clearance of the government - The Foreign Private Investment (Promotion and Protection) Act of 1980 guarantees protection against expropriation. If a foreign investor becomes subject to a legal measure that has the effect of expropriation, adequate compensation will be paid, and it will be freely repatriable. The amount of the compensation will be determined in accordance with the market value of the investment immediately before the measure went into effect. Since the passing of this Act, there has been NO instance of expropriation in Bangladesh.
- Companies are regulated by The Companies Act 1994 and The Registrar of Joint Stock Companies & Firms (RJSC).
- The company law restricts the maximum number of shareholders to 50 and the minimum number to 2 for a private limited company
- Institutions (local and foreign) and associations are eligible to subscribe to shares of private limited companies.
- Invitation to public to subscribe to shares or debentures is prohibited unless public limited conversion is affected.
- Must have registered office in Bangladesh.
- Must have a minimum of 2 (two) directors. Directors can be both resident and non-resident. Directors mustbe individuals.
- No minimum paid up or authorized capital requirement. Investors are free to choose their desired authorized capital limit and paid up capital amounts and the government fees payable on incorporation will be calculated accordingly.
Branch/Liaison Office
Overview
- Foreign entities not registered (with no legal presence) in Bangladesh can setup in the form of a Branch or Liaison Office.
- Regulated by Bangladesh Investment Development Authority (BIDA) of Bangladesh and by Bangladesh Bank
- Activities of Branch and Liaison offices are restricted to those stated in the Bangladesh Investment Development Authority permission.
- Such offices can carry out principal business activities of the parent entity.
- Inward remittance of minimum US$ 50,000 must be brought in within 2 months to meet operational expenses.
- Permission given for 3 years and subject to renewal.
- Security clearance is required from the Ministry of Home Affairs for a liaison office working on government projects.
- Needs to inform Bangladesh Bank for opening a bank account.
- Allowed to maintain a foreign currency account.
- Local revenue earning is prohibited. However branch offices can apply for a special waiver and earn local revenue.
- Outward remittance is prohibited.
- No separate legal status from parent company which will be the legal representative of BO/LO. All responsibilities will lie with the Parent Company for the operations of the branch/liaison office
- For industrial undertakings, the ratio of local and foreign employee should not be less than 20:1 respectively. For commercial offices, the ratio of local to foreign employee is 5:1.
