Bangladesh has become an attractive hub for investment thanks to rapid economic growth in the last decade. As such, the Bangladesh market is not only luring investors locally, but internationally as well. Before setting up any company in Bangladesh or investing in the Bangladeshi market as a local or foreign investor, here is a summary of ten things to know about setting up a company in Bangladesh.
1. Difference between a private limited company and a partnership/sole proprietorship business
Legally speaking, what sets a company apart from a sole Proprietorship or a partnership business is that the former becomes a separate legal entity i.e. the owner is not personally liable to bear any debts and liabilities of the business. Limited companies have separate legal identities and hence the companies can enter into contracts or sue and be sued in their own names. Practically, a company is the only type of entity that properly allows for investors in the business. Investors, whether active in the running of the business or not, can hold shares in a company while the founders run the business. Such an arrangement cannot be conveniently structured into in a partnership or a sole proprietorship.
2. Minimum number of shareholders is two (2)
A private limited company must have a minimum of two (2) shareholders and a maximum of fifty (50), although a vast majority of private limited companies incorporate with 2 or 3 shareholders.
3. Bangladesh companies allow 100% foreign ownership
There are no restrictions on foreign ownership in companies in Bangladesh, except in few restricted sectors. As long as the requirement of having 2 shareholders is met, a company canb e fully held by foreign and non-resident individuals and companies.
4. Minimum number of directors is two (2)
A private limited company must have a minimum of two (2) directors. There is no requirement for these directors to be local – so all directors of a company can theoretically be foreign as long as they hold valid work permits. Practically speaking, it is often convenient for 100% foreign held companies to have a local director as work permit applications for foreign directors take considerable time to process.
5. Minimum number of shareholders’ meetings in a year
After incorporation, the first annual meeting of shareholders (Annual General Meeting or AGM) must be held within a period of eighteen (18) months from the date of incorporation and if such general meeting is held within that period, it shall not be necessary for the company to hold any annual shareholders’ meeting in the year of its incorporation or in the following year. The next annual shareholders meetings need to be held fifteen months from the date of the last annual shareholder’s meeting of the company. Besides AGMs, if the company needs to hold general meetings, it may hold extraordinary general meetings or EGMs for matters that require shareholder approval.
6. Minimum number of board meetings in a year
The private limited company must hold at least one board meeting every three months and at least four board meetings every year.
7. Meetings can be held virtually
In Bangladesh, meetings of private limited companies can be held through video conferences provided they are allowed in the articles of association of the company. Online meetings have particularly been prevalent since the Covid-19 pandemic.
8. Timeline for incorporation
In terms of a timeline for incorporation to be complete for limited companies, it generally takes from 1-4 weeks from the date of submitting all the required documents to RJSC for the company to be registered depending on whether there is any foreign shareholding or not in which case the time taken is longer. After successful completion of the incorporation of the company, soft copies of the certified copies of the Memorandum of Association and Articles of Association, Form XII (Particulars of Directors) and a certificate of incorporation are provided by the RJSC.
9. Basic licenses required
After incorporation, every company must register for taxes at the appropriate taxation authority under the National Board of Revenue (NBR) and obtain a tax identification number (TIN).
Companies have to obtain a trade license from the local governmental authority under whose jurisdiction it does business. If a company has multiple offices or places of business, trade license is required against each of the addresses.
For VAT/BIN purposes, companies register with the Customs, Excise, and VAT Commission under the National Board of Revenue.
Moreover, foreign owned companies or companies that employ foreign employees need registration with the Bangladesh Investment Development Authority (BIDA) if their services are required. BIDA’s responsibilities include issuing recommendations for work permits for foreign employees, recommending visas for foreign investors and employees, recommending industrial import certificates, approving certain foreign loans, approving repatriation of dividends, etc.
10. Costs of incorporation
The following table give indicative information of the official fees to be paid to the Registrar of Joint-Stock Companies and Firms (RJSC) during the incorporation of Private limited companies.
Private Limited Company
|Authorized Capital||BDT 1000000||BDT 10000000||BDT 5,0000000|
|Registration fee||BDT 0.00||BDT 6,000.00||BDT 38,000.00|
|Registration filing fee||BDT 1,200.00||BDT 1,200.00||BDT 1,200.00|
|Stamp of Memorandum of Association and Articles of Association Fee||BDT 12300.00||BDT 32300.00||BDT 32,300.00|
|Certified Copy MOA+XII+Digital Certificate||BDT 1,220.00||BDT 1,220.00||BDT 1,220.00|
In addition to the above, legal fees are usually charged by law firms for drafting the Memorandum and Articles of Association which lay out the objects of the company and its governance structure. Further fees may be charged for miscellaneous costs.
Written and compiled by the Corporate and M&A team at Mahbub & Company