09 Aug Relaxation in repatriation of proceeds of sales and transfer of shares for foreign investors
The Bangladesh Bank has untied its policies to a certain extent with regard to repatriation of sales proceeds of shares held in non-listed companies by foreign investors.
In this regard, the Foreign Exchange Invest Department (FEID) of Bangladesh Bank has issued a circular letter on 18 June, 2020, addressing all the authorized dealers in Bangladesh. In the letter, Bangladesh Bank has referred to FEID Circular No 01 of May 06, 2018, which outlined for working procedures referring to valuation approaches for submission of applications to Bangladesh Bank for repatriation of sales proceeds of non-resident equity investment in non-listed public limited companies and in private limited companies.
With a view to further simplification for repatriation of sales proceeds of non-listed shares, Bangladesh Bank has decided the following-
- Authorized Dealers (AD) may effect remittances on account of sales proceeds of shares regardless of amount, the fair value of which is determined by the management of the target companies through net asset value (NAV) approach based on the latest audited financial statements submitted together with tax returns. ADs shall satisfy themselves from the undertaking of the target companies countersigned by auditors to the effect that in NAV approach audited financial statements have contained no revalued assets, intangible assets, expenses/losses shown as assets. The certificate should specify that the impairment of assets has been adjusted. The ADs should also be ensured that there is no abnormal growth in total assets in any of the last three years, particularly last year;
- No permission from Bangladesh Bank is required to repatriate sales proceeds of shares up to Tk 10.00 million equivalent foreign currency without valuation reports from independent valuers;
- ADs may effect remittances of above Tk 10.00 million upto Tk 100.00 million equivalent foreign currency on account of sales proceeds, the fair value of which is determined in terms of valuation methods prescribed in FEID Circular No. 1 dated May 06, 2018. Within 30 days of remittances, ADs shall submit post facto reports detailing the transactions to Foreign Exchange Investment Department at Bangladesh Bank Head Office.
- ADs shall, before executing the transactions, satisfy themselves to the effect that the target company has complied with the provision of paragraph 2(A) and 2(B), chapter 9 of the Guidelines for Foreign Exchange Transactions-2018 (GFET), Vol-1. On completion of the transactions, ADs shall comply with usual reporting routine and preserve the records of the transactions for eventual inspection, unless under investigation, for a period of 5 years;
- ADs shall ensure that the outward remittance under the authorization is executed one-time against the particular deal. Subsequent deals are, if any, subject to the instructions of FEID Circular No. 1/2018. In case of inconsistencies identified, ADs should seek opinion from Bangladesh Bank;
- As usual, ADs shall observe due diligence of KYC, AML/CFT standards, regulations on payment of taxes and so on.
To attain the fullest possible result, Prime Minister’s Office has published “One Stop Service (Bangladesh Investment Development Authority) Rules (hereinafter referred to as “OSS Rules”), 2020” as a gazette on April 26, 2020. The set of rules enunciates as to the simplification of investment policies both domestic and foreign, the establishment of several government authorities to snowball the activities and a schedule of timeframe for certain services.
In the Schedule of the OSS Rules 2020, fixed timeframe has been stated for the services rendered by Bangladesh Bank including repatriation of profits and dividends. A timeframe of 15 (Fifteen) days has been fixed for services in regard to repatriation of money for non-listed companies in the Stock Exchange. More details of the OSS Rules can be found here.
Update by Wahid Sadiq Khan, Associate and Md. Ashfaqul Islam, Research Associate