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Companies Act 1994

Companies Act 1994 (Act XVIII of 1994) governs company law in Bangladesh. It received the assent of the President of the People’s Republic of Bangladesh on 11 September 1994. Before its enactment in 1994, company law was governed by the Companies Act 1913 which was amended in 1915, 1920, 1926, 1930, 1932, 1936, 1938, 1949 and 1969, 1973 and 1984.

The Companies Act 1994 has eleven parts. Part-I contains the preliminary aspects of the act including the short title of the act, commencement and extent, definitions of various terms. Part-II is concerned with formulation and incorporation of companies, including bank companies, and memorandum of association for various types of companies, articles of association, general provision for registration of memorandum and articles of association, associations not for profit, and companies limited by guarantee. Part-III mainly narrates the rules for share capital, registration of unlimited company as limited, and the limited liability of directors. This part states the rules and procedures for distribution of share capital of companies and the provisions for reduction of share capital. (The Companies Act 1994)

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How to form a Company under RJSC Bangladesh

Bangladesh is becoming one of the most promising emerging markets in the world. Some of the top reasons include its openness to foreign investment, competitive labor costs, and rapid economic growth. It is essential to know what legal entities are available to foreign investors. Here, you will find an easy guide to company registration in Bangladesh.

Overview of Legal Entities in Bangladesh

Type of Entity Maximum Allowed Foreign Ownership Minimum Paid Up Capital Minimum No. of Shareholder
Private Limited Company 100% $1* 2(maximum of 50 shareholders)
Public Limited Company 100% $1* 7
Subsidiary Company 51%-100% $1* 2
Branch Office 100% No Capital No shareholders
Representative Office 100% No Capital No shareholders
For hiring a foreign employee, it is essential to make an inward remittance of US$ 50,000 beforehand.

Requirements for company registration in Bangladesh

Bangladesh is very open regarding foreign ownership, allowing up to 100% of foreign ownership in most sectors. But, in some sectors, you need prior approval from the government and a few sectors restrict both local and foreign investment. Similarly, other benefits include the right to purchase land and property in the name of the company, tax incentives, etc.

Any person who is above 18 years of old is eligible to register a company. Furthermore, the law prescribes a minimum of two and a maximum of 50 shareholders, and two directors. Also, note that you can form a joint venture with a local entity to share the strengths and lessen the risks.

Step by Step process of Company Registration under RJSC in Bangladesh

One – Name Clearance

At the beginning, a name of entity is essential to register a company, so the first step is to get an approval for your company’s name from The Registrar of Joint Stock Companies and Firms (RJSC). If it is approved by the RJSC then one can go for making documents.

Two – Making Documents for Submission to the RJSC Office

Secondly, you need to draft the Article of Association (AoA) and
Memorandum of Association (MoA). While preparing those, you need to
draft it along with other forms as requirements for compliance to RSJC.
Once the paid up capital is remitted the bank issued an encashment
certificate and afterwards all documents are submitted to RJSC for
incorporation. Relevant Government fees need to be paid.

Three – Opening a Bank Account

Thirdly, you must open a bank account in the proposed name of the
company and make an inward remittance of at least US$ 50,000 if you plan
on hiring foreign employees.

Four – Encashment Certificates for Foreign Investors

Foreign investor is required to submit certificate of encashment along
with other documents. (“Certificate of Encashment of Foreign Currency”
CEFC issued to the beneficiaries for the Remittances received from
abroad and to be paid in Local Currency. Moreover, it is advised that
there is no restriction from State Bank for issuance of “Certificate of
Encashment of Foreign Currency” against these remittances)

Five – Submission of documents to the RSJC

In this step, you have to submit all the required papers to the RJSC and
pay the registration fees. You can also look into RSJC for the
incorporation certificate during the standard process time.

Six – Post-registration compliance

By this time, you have the certificate of incorporation, Articles of
Association (AoA) and Memorandum of Association (MoA), and you have a
newly registered company in Bangladesh.

After completion of above process, you also need to proceed to some additional licenses and registrations as

  • Trade License
  • Tax Identification Number (TIN) issued by National Board of Revenue, Bangladesh
  • VAT Registration Certificate, issued by National Board of Revenue, Bangladesh
  • Fire License (If Necessary)
  • Environmental Clearance Certificate (if necessary)

Licenses if the company intends to import and Export

  • Membership of any trade organization /chamber of commerce in Bangladesh
  • Import registration certificate issued by Registrar of Import and Export
  • Export registration certificate issued by Registrar of Import and Export

Licenses required for manufacturing plants/company

  • Factory license from Department of Factories & Establishment
  • Environment certificate
  • BIDA registration
  • Fire safety license

LegalGlobe provide one stop service to set up business in Bangladesh. We have a lot of practical experience in setting up business and company formation in Bangladesh, Malaysia and South Korea.

Alternatives to setting up a company in Bangladesh

Branch

A branch is an extension of its parent company and not a separately incorporated entity. In other words, the parent company is responsible for its branch’s liabilities. A branch can engage in commercial activities, given BIDA’s approval. However, the Exchange Control Guidelines monitors its operations strictly.

The average establishment time of a branch in Bangladesh is 45- 60 days.

Liaison office

A liaison office as like as a branch office. This process is subject to BIDA’s approval as its primary requirement. It must have a parent company abroad, and its activities are limited since it only serves as a communication or coordination instrument of the business resources in Bangladesh.

Note that, a liaison office cannot earn any local income in Bangladesh. The parent company shoulders all of its expenses and operational costs through remittance. There also cannot be any outward remittances of any kind from Bangladesh resources, except the amount brought in from abroad. Similarly, it also follows the general process of business registration in Bangladesh. As follows;

  • A board resolution from the parent company needs to be issued with declaration to open a branch office or liaison office in Bangladesh
  • The incorporation certificate, MoA&A of the parent company in English needs to Attested from relevant Bangladesh embassy/ High Commission.
  • An application with all supporting documents listed above needs to be filed with Bangladesh Investment Development Authority (BIDA) and the application once approved in BIDA board , Government fees is required to be paid. After payment of Government fees, permission for Branch office or liaison office is granted.

Franchise operation with local promoters

Foreign-owned companies can also enter into franchises in Bangladesh. Through a franchise, you can permit local promoters to se your brand, provide them with technical support and charge fees or commission on their activity, etc. A franchise operation complies with both the purchase and license agreement.