Bangladesh offers a favorable environment for foreign investments due to its competitive labor costs, rapid economic growth, and investment-friendly policies. The country’s strategic location, large domestic market, and growing middle class further enhance its appeal to investors. Understanding the types of legal entities available and the steps required for company registration is essential for anyone looking to establish a business in Bangladesh.
Types of Legal Entities in Bangladesh
1. Private Limited Company
A private limited company is a preferred choice for foreign investors because it allows full foreign ownership. Key requirements include:
- Shareholders: Minimum of 2 and a maximum of 50.
- Directors: At least 2, who can also be shareholders.
- Liability: Limited to the extent of their shares.
- Capital: No minimum capital requirement, but the capital must be realistic to the nature of the business.
2. Public Limited Company
A public limited company can offer shares to the public to raise funds. Key requirements include:
- Shareholders: Minimum of 7.
- Directors: At least 3.
- Prospectus: Must issue a prospectus or a statement in lieu of a prospectus before shares can be offered to the public.
- Regulation: Subject to more stringent regulatory requirements compared to private limited companies.
3. Branch Office
A branch office represents the parent company based abroad and must be approved by the Bangladesh Investment Development Authority (BIDA). Key points include:
- Approval: Special approval from BIDA.
- Activities: Limited to activities approved by BIDA; often includes marketing and liaison roles.
- Taxation: Branch offices are subject to local taxes on income earned within Bangladesh.
4. Liaison/Representative Office
A liaison or representative office acts as a communication channel between the parent company and local businesses. Key points include:
- Approval: Requires approval from BIDA.
- Activities: Cannot engage in commercial or revenue-generating activities.
- Purpose: Typically used for market research, promotional activities, and as a coordination office.
Steps to Register a Company in Bangladesh
Step 1: Name Clearance
- Process: Obtain name clearance from the Registrar of Joint Stock Companies and Firms (RJSC).
- Requirements: Ensure the proposed name is unique and not similar to existing companies.
Step 2: Document Drafting
- Memorandum of Association (MOA): Defines the company’s scope and operations.
- Articles of Association (AOA): Outlines the internal management structure and rules.
- Forms: Complete various forms provided by the RJSC, such as Form I (Declaration on Registration of Company), Form VI (Notice of Situation of Registered Office), and Form IX (Consent of Director to Act).
Step 3: Opening a Bank Account
- Bank Account: Open an account in the name of the proposed company.
- Deposit: For companies hiring foreign employees, a minimum deposit of $50,000 is required.
Step 4: Document Submission to RJSC
- Submission: Submit the drafted documents and completed forms to the RJSC.
- Fees: Pay the required registration fees.
- Review: The RJSC reviews the documents and, if everything is in order, issues a Certificate of Incorporation.
Step 5: Post-Registration Compliance
- Trade License: Obtain from the local City Corporation or Municipality.
- Fire Certificate: Necessary for ensuring compliance with fire safety regulations.
- Tax Identification Number (TIN): Required for tax purposes.
- Environmental Clearance Certificate: If applicable, depending on the nature of the business.
- VAT Registration Certificate: For businesses engaged in activities subject to VAT.
- GST Registration: Required for businesses involved in the supply of goods and services, ensuring compliance with the Goods and Services Tax regulations.
Additional Considerations
Legal and Regulatory Framework
Understanding the legal and regulatory framework is essential. Businesses must comply with the Companies Act 1994, which governs the formation, functioning, and dissolution of companies in Bangladesh.
Taxation
Companies must adhere to the tax regulations, including corporate tax, VAT, and other applicable taxes. It is advisable to consult with tax professionals to ensure compliance.
Employment Regulations
Businesses must comply with the labour laws, including hiring practices, employee benefits, and workplace safety standards.
Intellectual Property
Protecting intellectual property through trademarks, patents, and copyrights is crucial for safeguarding business interests.
Conclusion
Setting up a company in Bangladesh involves understanding the types of legal entities available, completing a series of steps for registration, and ensuring compliance with post-registration requirements. While the process may seem daunting, professional services can provide valuable assistance, guiding you through each step to ensure a smooth and successful incorporation. By leveraging local expertise, you can navigate the regulatory landscape effectively and establish a thriving business in Bangladesh.
