Incorporating a private limited company in Bangladesh under the Companies Act, 1994
The company registration process at the Registrar of Joint Stock Companies and Firms, Bangladesh (RJSC) for foreign investors explained
Step 1:
Obtaining Name Clearance for proposed company: An online application has to be made using the RJSC website and making payment of the required government fee for a ‘Name Clearance’ seeking approval/clearance of the proposed company name from the Registrar. Names of pre-existing companies, generic words, abusive/offensive words, anti-nationalistic names and words as well as any peculiar terms would likely be rejected. This process is usually completed in 1 - 2 working days.
Step 2:
Application for opening a proposed company account with a scheduled bank in Bangladesh: The purpose of this account is to receive the investment of the foreign shareholder in foreign currency (to be converted and encashed into local currency after remitting). The proposed company account is therefore a pre-condition to incorporating a company that is partly or wholly owned by non-residents/foreign nationals/foreign shareholders at the time of incorporation. Below are the draft documents that are typically required by most banks (i.e. they vary from bank to bank) in order to open a proposed company account (there is some overlap as the majority of these documents are also required to be filed at the RJSC for the company registration itself) -
Memorandum and Articles of Association (with executed subscription page)
Encashment Certificate
Name Clearance Certificate
Treasury Challan ( This is an official government receipt as proof of payment of the government fees and stamp duty in relation to incorporation of a company.)
Form I (Declaration on registration of company)
Form VI (Notice of situation of registered office and of any change therein)
Form IX (Consent of directors to act)
Form X (List of persons consenting to be directors)
Form XII (Particulars of Directors, Managers, Managing Agents and of any change)
Bank Account Opening Application Form
Application/Cover Letter for opening bank account
Draft Board Meeting Minutes of proposed company in company pad/letterhead authorising the opening of the account
List of Directors with their particulars/details printed in company pad
List of Signatories pertaining to the account
Bank Due-Diligence and Opening of Proposed Company Account: The bank would conduct its own diligence on the basis of the documents submitted to the bank (in the process fulfilling checks for anti-money laundering and combating financing of terrorism on the sponsors/shareholders), ensuring that disclosed information is true and accurate as well as confirming that nationals/companies from countries with whom Bangladesh operates a trade embargo and/or does not accord diplomatic recognition (e.g. Israel) do not hold direct or indirect interests in the company. During this process, the banks may request additional documents such as memorandum and articles of association belonging to the parent company/companies, in particular where the shareholders are corporate entities with parent shareholding companies. This process may take anywhere in between 5 - 20 working days depending upon the bank involved.
Step 3:
Remit funds to the proposed company account : The funds for the paid-up capital (equivalent to the share capital at face value in local currency) must be remitted to the account from the respective bank accounts of the shareholders (whether juridical or natural persons). It is necessary for the remittance to be made from the home country of the investor to ensure seamless remittance of dividends from the Bangladesh company as well as repatriation of investment proceeds/capital if/when the shareholders divest from the company. The purpose of the remittance must be expressly stated as being for subscribing to shares in company or “equity investment”.
Submission of Form - C and Collection of Encashment Certificate: The beneficiary bank where the proposed company account is held must, upon receiving the funds into the beneficiary account, would require a duly completed in Bangladesh Bank-prescribed “Form-C” to be submitted as a formal declaration of the purpose of the remittance. Thereafter the bank would convert the remitted funds into local currency. Upon conversion and being satisfied that the converted funds are at least equal to the proposed paid-up capital of the foreign shareholders, the bank would issue an “encashment certificate” confirming receipt of the equity investment and stating its amount. This process is usually completed within 2 - 4 working days.
Step 4:
Submission of signed registration documents and Encashment Certificate at RJSC and payment of government fees: The documents listed in Step 2 above (including the memorandum and articles of association; signed share subscription page; statutory/incorporation forms but excluding the bank account opening documents), together with the encashment certificate, must be submitted at the RJSC and the requisite government fees paid (determined by the authorised capital of the company). This can be achieved in 1 working day.
Step 5:
Verification of remittance of foreign equity investment / authenticity of Encashment Certificate: Upon receipt of all the company registration documents, the encashment certificate and the government fees for registration, the RJSC would carry out a verification with the concerned bank to determine the authenticity of the encashment certificate and the information contained therein. This verification process is normally carried out through postal communications and can take several days to weeks, but can be expedited by professional service providers in cases of urgency. This process may take between 1 - 5 working days or more.
Incorporation of Company: After concluding the verification mentioned above, the RJSC would normally register the company within 3 - 5 working days, provided there are no outstanding documents or information pending submission. The RJSC would issue digitially signed (soft copies) - (a) Certificate of Incorporation; (b) Memorandum and Articles of Association; and (c) Form XII.
The entire process from initiation of Step 1 to completion of incorporation may take between 12 - 35 working days.
Other issues to note:
There is no minimum paid-up capital requirement, although in situations where the company intends to employ foreign nationals by obtaining a work permit, the minimum paid-up capital requirement is US$ 50,000
The cost involved for incorporating such a company (in terms of government fees and taxes) is dependent upon the chosen authorised capital of the proposed company. An indication of the total receipted cost can be checked here.
Currently, there is a requirement for companies to have a minimum of 2 (two) shareholders and 2 (two) directors (they can be the same person where they are shareholder-directors). The two shareholders can be natural persons or corporate shareholders/juridical persons. Corporate shareholders can be represented on the board of directors through their respectively appointed nominee directors. One company can have effective 100% ownership of the Bangladesh private limited company by holding the shares through one or more of its wholly owned subsidiaries. E.g. Company B and Company C registered outside Bangladesh are wholly owned subsidiaries of Company A. Company B and Company C can hold shares in the Bangladesh subsidiary in any proportion of shares to provide Company A with 100% effective ownership. An amendment to the Companies Act, 1994 is underway to allow sole shareholder companies in Bangladesh. This amendment is yet to be enacted.
The memorandum of association of the proposed company which would include the objects of the company is capped at approx. 750 words and therefore must be carefully drafted. Any subsequent amendments to the memorandum of association of the company after incorporation of the company would require an application at the High Court Division of the Supreme Court of Bangladesh - a process that is time-consuming and costly.
Reference to any business types/activities/objects relating to restricted or strictly regulated industries in the memorandum of association may be rejected by the RJSC or may require prior permission/approval from the relevant ministry/authority of the Government of Bangladesh, e.g. schools, banking companies etc.
For more information, contact Ahnaf Chowdhury.
