Often business entities require basic and preliminary information regarding procedures for setting up business in Bangladesh. We have complied these information for anyone might want to know.
- Company formation
- Setting up branch office
- Partnership
- Proprietorship Business
- Agency
- Enlisting Joint Venture Interest
- Foreign investment incentives
- Trademark and Patents
- Labour laws in Bangladesh
- Taxation in Bangladesh
- Environmental Regulations
- Visa and Work Permit
- Application for Ship Arrest
On the assumption that a foreign parent company will establish a company in Bangladesh with 100% foreign equity, the steps for formation of the company in Bangladesh are broadly outlined as follows : -
- Name clearance
- Resolution with regards to the formation of the company in Bangladesh
- Preparation and finalisation of the draft Memorandum of Association and Articles of Association
- Subscription of capital contribution at the time of incorporation through authorised schedule bank in Bangladesh.
- Filing application for registration in relevant prescribed forms duly filed and signed
- Post-registration follow-up - After the registration is complete the following requires to be obtained : -
- Tax Identification Number (TIN)
- VAT registration number
- Trade licence from the city corporation.
- d. Opening of Bank account in the name of the Company through Board resolution in this regard
- Open corporate bank account- To open a bank account, an application in prescribed form has to be made along with the following documents : -
- A Copy of Memorandum and Article of Association.
- A resolution of the Board of Director of the Company.
In order to establish your branch office in Bangladesh, necessary application in prescribed form has to be submitted to the concerned authorities of the Government for obtaining permission/approvals. The concerned authorities are listed below:
- Government of Bangladesh (Ministry of Industries), Dhaka;
- 2) Bangladesh Bank, Dhaka;
To obtain the permissions/approvals of the above authorities, the following information and papers/documents will be required as shown against each authority. The information mentioned below requires to be filed with the said application under the signature and seal of the Managing Director of the principal company. The seal of the Company also has to be affixed thereon.
- Government of Bangladesh (Ministry of Industries)
- Full name, address, telephone, fax numbers of the principal company, with country of origin;
- Intended field of business in Bangladesh through proposed Branch Office;
- Function of the principal company/firm in brief;
- Date of operation of the proposed Branch Office;
- Period for which permission is sought;
- Proposed organizational set up of the company's Branch Office;
- Initial approximate expenditure and operational expenses of the company's Branch Office and source and nature of inflow of money required for running the Branch Office for the purpose;
- Certificate of Incorporation of the principal company and resolution of the Board of Directors to establish a Branch Office in Bangladesh, duly notarized and authenticated by the High Commission/Embassy of Bangladesh in the country of origin
- Memorandum and Articles of Association of the principal company, duly executed, notarized and authenticated by the High Commission/Embassy of Bangladesh in the country of origin
- Power of Attorney given in favour of The Law Associates duly notarized and authenticated by the High Commission of Bangladesh in the country of origin
- Bangladesh Bank
- Full name, address, telephone, fax numbers of the principal company, with country of origin;
- Place of incorporation and registration of the principal company in the country of origin;
- Authorized and paid-up share capital of the principal company, both equity and preferential (if applicable);
- Name, address and nationality of the Directors of the principal company as well as their place of permanent residence;
- Any share held in the principal company by Bangladeshi national or company registered in Bangladesh with full particulars (name of the shareholder, nationality, number and value of shares held);
- Particulars of the activity (trading/commercial/industrial/consultancy) of the Principal Company;
- Name and address of the Bangladeshi agent/representative if any (including nature of activities undertaken or the services rendered by Bangladeshi agent/representative and term including remuneration payable to agent/representative);
- Source of finance to the Branch Office in Bangladesh;
- Whether surplus earning, if any in Bangladesh, to be remitted abroad;
- Whether any foreign personnel will be employed; if so, a list giving the names and nationalities of such persons, their designation, period of employment, for working in Bangladesh and particulars of government approval for their employment;
- Certificate of Incorporation of the principal company, duly notarized and authenticated by the High Commission/Embassy of Bangladesh in the country of origin-two copies including one original;
- Memorandum and Articles of Association of the principal company, duly notarized and authenticated by the High Commission/Embassy of Bangladesh in the country of origin - two copies including one original;
- Resolution passed by the Board of Directors for establishment of branch/liaison office in Bangladesh duly notarized and authenticated by the High Commission/Embassy of Bangladesh in the country of origin-two copies including one original;
- Appointment letter of the local Manager/Branch Representative, if any, in the line of a Board Resolution duly notarized and authenticated by the High Commission/Embassy of Bangladesh in the country of origin;
- List of local employees if appointed;
- Power of Attorney favouring the legal representative duly executed.
Business can also be conducted in Bangladesh by forming a partnership as per Partnership Act 1992. Persons entering into partnership with one another are called individually and collectively a ‘firm’. Agreement by which partnership is entered, needs to be registered on payment of requisite fee. Partnership firm is registered with the RJSC by submitting prescribed forms with requisite information. Partners are liable for their respective tax as per the prevailing rate fixed for individual.
Any individual by obtaining a Trade License from the concerned City Corporation/Municipality may also conduct business without forming any legal entity. Tax is payable as per the prevailing rate fixed for individual.
Any individual/entity may act on behalf of its principal. Relationship between the principal and the agent would be governed by the agreement executed between them. Agent will be required to obtain permission from Bangladesh Bank under Section 18A of Foreign Exchange Regulation Act 1947 in order to act or accept appointment to act as agent in the trading or commercial transactions of a foreigner or of a company not incorporated under the laws of Bangladesh.
The Government of Bangladesh encourages foreign investment both in the form of 100% foreign ownership and joint venture. Joint ventures could be formed in any combination of equity participation (from 1% to 100%).
Joint venture and 100% foreign investment proposals in the private sector:
- Entrepreneur/investors are advised to apply for registration to BOI in order to avail of facilities and the institutional support services provided by the Government;
- Prescribed application form has to be collected from BOI Office or downloaded from BOI website www.boibd.org.
Permission for setting up joint venture industrial units with the public sector corporations:
Any individual entrepreneur either local or foreign can set up an industry with public sector corporation. Such joint venture is required to be registered with the BOI if the private sectors contribution is more than 50% of the project cost and in such case it is treated as private sector project. For any public sector which makes contribution out of their own fund needs approval of the concerned ministry. If the contribution of the corporation is 50% or above, it is treated as a public sector project. The public sector project is processed by the concerned Ministry for approval of the Planning Commission.
- Government promotes rapid privatization of the state-owned enterprises (SOEs).
- Infrastructure and high involvement projects like power have been encouraged for public-private joint venture.
Foreign investors are entitled to a number of incentives so as to attract investment in Bangladesh. Furthermore, the government has liberalised the industrial and investment policies in recent years by reducing bureaucratic control over private investment. Some of the investments incentive to attract foreign investors are as follows
1. Fiscal incentives : |
|
2. Duty : |
No import duty for export oriented |
3. Tax Law : |
Double taxation can be avoided in case of |
4. Remittance : |
Of royalty, technical assistance fee allowed. |
5. Flexibility of ownership : |
Foreign investors can set up ventures |
6. Exit : |
An investor can wind up an investment |
7. Legal protection: |
Right to protection of law for every citizen and to any other person within Bangladesh is enshrined in Article 31 of the constitution, stipulating that “…in particular no action detrimental to life, liberty, body, reputation or property of any person shall be taken except in accordance with law. |
• Procedure for registration of trade mark in Bangladesh
For registration of Trade Mark an application in prescribed Form, duly filled in, has to be filed with the Registrar of Trade Marks, Government of Bangladesh, Dhaka. Five specimen copies of the Trade Mark sought to be registered need to be attached with the application.
Following documents are required for registration of Trade Mark:
- A notarized copy of Trade Mark certificate(s) in respect of Trade Mark registered in your country if any.
- Five copies of specimen Trade Mark to be registered.
- For filling an application and follow up work we would need an authorization in prescribed form of the Government to be executed by the concerned company in favour an Advocate of the Law Associates (Specimen copy would be sent when asked for).
Time for getting the registration certificate:
After examination of the Application for registration of the Trade Mark and completion of the required formalities it is likely to take 1-2 years to get the registration certificate. The reason for this delay is that about fourteen thousand application are pending for registration. However it may be possible to obtain the provisional certificate within a month of filing the application for registration of Trade Mark.
• Procedure for registration of patent mark in Bangladesh
An application is required to be made prior to filing at the Patents Office. The applicant must make a declaration in the application clearly stating that he is in possession of an invention. In the event of joint application, one must claim to be the true and first inventor of the invention. A representative authorized under a power of attorney can also obtain a patent on behalf of the original inventor.
The following are required to file a patent application:
- Name of the inventor (applicant)
- Address(s) and nationality of the inventors
- Two sets of specification and one set of drawing on tracing paper (transparent)
- Power of Attorney (From – 31)
- Certified copy of the foreign patent (in case of claiming priority)
Labour Code 2006 acts as the current law protecting rights of labours and workers in Bangladesh. It is a comprehensive piece of legislation consolidating all the previous legislation in this area. Apart from some provisions which has been repealed, the previous laws continue to be operative. The Labour Code covers issues such as minimum working hours, weekly rest, overtime hours and allowance, leave and benefits, time for payment of wages, documents entitled by the employee, termination of contract, employee welfare, health and safety. Official Gazette of October 22, 2006 elaborate more on the issue of minimum wages.
Corporate tax rate for industrial companies whose shares are publicly traded is 30% and the rate of whose shares are not publicly traded is 40%.
- Tax rate on other companies: Tax rate on income of all other companies including banks, financial institutions, insurance companies and local authorities ranges from 40% to 45%.
- Investment requirement by companies enjoying tax holiday: Companies enjoying tax holiday are required to invest 30% of their exempted income within two years from the end of the tax exemption period in the said undertaking or in new industrial undertaking or in stocks and shares of a public company or in government bonds or securities.
- Acceptance of returns of public limited companies: Returns filed by the public limited companies shall be accepted if it is accompanied by audited accounts and certified by a chartered accountant as to the correctness of the total income of the assessee.
- Salary of foreign technician: Salary received by or due to a foreign technician under contract of service approved by the NBR is fully exempted from paying tax (subject to prescribed conditions and limitations) for a period of 3 years from the date of his arrival in Bangladesh.
- Tax payable by the employer on remuneration of foreign technician: expenditure incurred by an employer in respect of remuneration of the foreign technician is fully exempted from income tax (subject to the stipulated conditions).
- f) Remuneration of foreign technicians employed by the consulting and engineering firms: Expenditure incurred as remuneration payable to a foreign technician by a Bangladesh firm carrying on the business of consulting and engineering is fully exempted from tax (subject to prescribed conditions and limitations).
Source : Bangladesh Investment Handbook, published by Board of Investment (BOI)
All industrial and other projects that may be potentially polluting are required, in accordance with the Environment Conservation Act 1995, to undertake some form of environmental impact assessment.
Environmental Clearance: Environmental clearance must be obtained from the Department of Environment. The process takes 15 days for projects with low levels of potentially adverse impact and 30 days for projects with significant impact.
Visa:
Business visitors to Bangladesh will require a visa. The visa has to be obtained from the Bangladeshi diplomatic mission in the visa applicant’s country. Bangladesh issues the following categories of business visas:
- Single-entry for three months
- Multiple-entry for three months
- Multiple-entry for six months
- Multiple-entry for one year
Landing Permit / Visa on Arrival (LP/VOA):
Foreign investors and businesspersons can apply for a LP/VOA on arrival at the Zia International Airport for a duration of 30 days provided:
- The foreign investor is identified by a certificate issued by BOI, BEPZA or the Ministry of Industries
- The foreign businessperson who is directly associated with import of Bangladeshi products is identified by a certificate from the relevant associations of export-oriented
- Commercial/industrial organizations (ie- Federation of Bangladesh Chamber of Commerce and Industry (FBCCI) or the Bangladesh Garment Manufacture and Export Association (BGMEA)).
- LP/VOA cannot be extended under any circumstances.
- e) The LP/VOA applicant must have $500 endorsed in his/her passport or in cash.
- f) The LP/VOA applicant must have a return ticket.
Work Permits
In order to employ a foreign national, it is imperative that the employer obtain a work permit. The following are the conditions need to be fulfilled before applying for a work permit:
Nationality of Employee : All nationalities, except for Israeli citizens will be permitted to
undertake employment in Bangladesh.
Registered Industrial Establishments : Employment of expatriate personnel should only be considered in industrial establishments which are sanctioned/registered by the appropriate authority.
Minimum Age of Foreign Employee : Persons below 18 years of age are not eligible for employment
.Local Experts not Available : Employment of foreign nationals is normally considered for jobs in which local experts/technicians are not available.
Decision made by the Board of Directors : The work permit application must include the decision of the Board of Directors to take on new employees.
Maximum number of Foreign Employees : Number of foreign employees should not exceed 15% of the total employees including top management personnel
.Duration of Employment : Initially employment of any foreign national is considered for a term of 2 years which could then be extended on the basis of merit of the case.
Security Clearance : Security clearance must be obtained from the Ministry of Home Affairs
.Our courts will allow arrests in cases of a claim relating to maritime lien, ownership, a registered mortgage or damage as the case may be falling within the ambit of courts jurisdiction as is allowed under the Admiralty Court Act 1861. A suit for the claim amount is to be filed along with a petition for arrest supported by an affidavit at a preliminary hearing in the Admiralty Court and if the prima facie claim is made out a warrant of arrest is issued by the Court.
Documentary evidence such as original copies of vouchers, receipts, requisitions, demands, muster rolls, receipts for provisions and supplies, document of lien, charge, mortgage, or of any claim or damage or evidence of ownership and all other relevant document are required to institute the suit.
Ship arrest is a right in rem and therefore ships of subsidiary companies cannot be sought to be subject to arrest. Furthermore, the defendant in the suit can order the arrest warrant to be lifted by opposing it. Upon satisfaction of the arguments or upon furnishing security the court may order the vessel to be released, follows by the issuance of a warrant of release to be served on the ship and all the relevant and concerned authorities.
(Note and Disclaimer : All information here is without prejudice and could be subject to change by current policy and legislation)