Guide to open a company in Bangladesh
Due to its convenient location near two large seaports for exports, its low cost to establish a business and continuous rapid growth, investors are quickly identifying Bangladesh as a promising emerging market. Additionally, it offers tax holidays and exemptions, economic zones and a simplified process to import raw materials and machinery, making it even more attractive for foreign investment. The local experts at Horizons can help you seamlessly set up a company in Bangladesh.
Bangladesh has its own unique regulatory guidelines for setting up and operating foreign-owned companies. Here is what you need to know about this process.
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Preliminary considerations for setting up a business in Bangladesh
Before setting up your business, there are a few things that you will need to consider. For example, you will need to provide a local address to use as your registered address. This must be a physical address. Horizons can assist you with establishing a local, registered office.
Additionally, you will need to open a corporate bank account and deposit your initial paid-up capital. The process to set up a company in Bangladesh has been simplified for foreigners. All directors and shareholders can be foreigners. Additionally, you can complete the company incorporation process without having to visit Bangladesh.
You will not need to obtain any special visa to incorporate a business in Bangladesh. A business visa should be adequate if you want to visit periodically or attend company events on a short-term basis. However, if you want to relocate here, you will need to obtain a work permit.
There are several different types of entities that you can set up in Bangladesh, including:
Limited liability company
The most common and preferred type of business entity in Bangladesh for foreign businesses is a limited liability company. The most compelling reason for most foreign investors to set up this type of business is that private limited company shareholders are not liable for the debts of the company that exceed the amount of share capital they have contributed. Most sectors in Bangladesh allow 100% foreign ownership.
At least two directors must be appointed to set up a limited liability company in Bangladesh. These directors can be local or foreign. However, they must be at least 18 years old and must not have ever been convicted of malpractice in the past and must not currently be bankrupt. The articles of association for this type of business must state information about qualification shares that the directors must own.
There must also be at least two shareholders. There can be up to 50 shareholders, which may be natural persons or corporations. Directors can simultaneously be shareholders. After the incorporation process has been completed, additional shares can be issued and shareholders can transfer their shares to others.
You must prepare the memorandum of association and articles of association as part of the incorporation process. The memorandum of association must state the authorized capital. Bangladesh does not impose a minimum or maximum amount of authorized capital. The minimum paid-up capital to register a company in Bangladesh Taka 1. This amount can be increased after the incorporation process.
Limited liability companies in Bangladesh must submit audited financial statements to the Bangladesh Income Tax Authority every year.
Public limited company
Public limited companies are necessary if you want to trade shares on the Dhaka Stock Exchange.
To set up a public limited company, you will need to have at least seven shareholders who can be individuals or businesses. You must also need a minimum of three directors of any nationality. Public limited companies can raise public funds. These companies must comply with Bangladesh’s Securities and Exchange Commission Act 1993.
Alternatives to setting up a company in Bangladesh
Businesses that want to test the market or only engage in certain activities in Bangladesh may wish to use an alternative to setting up a company in Bangladesh, such as:
Branch office
A branch office is considered an extension of an overseas parent company and not its own separate entity. It must register with the Board of Investment and comply with its regulations. Branch offices can engage in commercial activities if they have the Bangladesh government’s approval. The parent company is liable for the branch office’s liability.
Branch offices must submit quarterly remittance statements and are subject to audit.
Representative office
A representative office is permitted if there is a parent company abroad. This type of office cannot earn any local income or engage in commercial activities. Instead, it is used for coordination, communication and marketing efforts. The parent company pays all of the expenses and operational costs of the representative office.
The representative office must register with the Board of Investment, the Registrar of Stock Companies and Firms, and the Bangladesh Bank.
PEO (Professional Employer Organization)
Another option is to use a PEO. A PEO hires employees on behalf of the foreign company in a legally compliant manner.
Process to set up a company in Bangladesh
Given Bangladesh’s openness to foreign investment, rapid economic growth and competitive labor costs, you may want to quickly begin the setup process. Horizons can discuss the various types of entities you can establish and guide you through this process.
Three distinct stages that make up the company setup process in Bangladesh include:
Name clearance
The first step is to obtain name clearance for your proposed business name. You can set up an account online to start this process and then apply for your proposed name. Your name cannot be identical or similar to an existing local company name, be reserved or be obscene or vulgar. Once you receive name clearance, your chosen name will be reserved for six months.
Bank opening
Next, you will open a bank account in your business’ name. You must then deposit money equal to the shares into the account. The bank will provide you with an encashment certificate.
Registration documents and submission
- Articles of Association
- Memorandum of Association
- List of directors
You will also need to pay registration fees.
Once your application is approved, the Registrar of the Joint Stock Companies and Firms will issue you a certificate of incorporation.
Post Registration steps
After you have completed the incorporation process, you may need to take additional steps, such as:
- Issue share certificates for all shareholders
- Obtain a company seal for your company
- Obtain a rubber stamp for your company
- Lease commercial space
- Apply for your trade license
- Apply for your tax identification number
- Obtain a VAT Registration certificate
- Obtain an Environmental Clearance Certificate, if necessary
- Apply for additional business licenses, if necessary for your company
Each calendar year, you will need to supply annual returns to the tax authority.
Horizons can help you with all of the steps described above. Contact us today to get started.
