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FM Associates

PREMIER FM HEIGHTS, 1ST FLOOR, HOUSE#88, ROAD#10/1BLOCK-D. NIKETON, DHAKA, BANGLADESH
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Work +8802 9853440
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Bangalore, Bhubaneswar, Chandigarh, Chennai, Cochin, Dhaka and 8 more

Legal 500 Doing Business in Bangladesh

Contributed by FM Associates

Doing Business in Bangladesh Graphic

FM Associates – at a glance

FMA is a well-reputed full-service law firm, situated in the commercial hub of Dhaka, the capital city of Bangladesh, which presents an appropriate mix of the necessary legal expertise, industry specialisation and commercial acumen.

This firm’s strength is its team of experienced and trained lawyers who treasure the value of diligence and knowledge, as well as creativity and innovation, in addressing their client’s needs. FMA aims to offer to its clients legal advice that meets the clients’ needs and expectations, and in this it has been hugely successful, as is evidenced by the firm’s ratings by various international journals.

At FM Consulting International (FMCI), a team of lawyers, chartered accountants, cost and management accountants, and business consultants, which has a proven record of accomplishment, provide excellent services and practical guidance that will support clients in accomplishing their corporate objectives. The Dhaka office was set up in the year 2007 and the firm expanded to Chittagong in 2015.
It is known for its integrity, efficiency and high degree of partner involvement. Its reputation is founded on the simple philosophy of personal, prompt service and advice relevant to the modern requirements of business. Upon a client’s subscription with its service they are paired with its team of dedicated, highly vetted professional accountants and consultants, who would learn their business practices and processes and start providing the best plausible solutions.

It maintains and upholds the highest quality standards for itself. This is seen in not only its choice of partners and professional staff, but also in their further training. The associates constantly attend external continuing professional development seminars in order to strengthen their specialised knowledge in various areas. Its connections with universities and colleges, and professional associations help it in pursuing this objective. It is affiliated with the global Fox Mandal Group, J. Mandal & Co., Chartered Accountants.

Country Profile: Bangladesh

Bangladesh a country located in the north-eastern part of South Asia. It is mostly surrounded by the borders of the India with some parts of Myanmar and the Bay of Bengal. The total population of Bangladesh currently stands at 159,077,513 (approximately) for which it is known as the eight most populous and is also one of the most densely populated country in the world with a density of 1,049 people per sq km.

Formerly known as East Pakistan, Bangladesh became independent on 26 March 1971 and after nine months of continuous bloodshed under the strong leadership of Father of the Nation Bangabandhu Sheikh Mujibur Rahman, it came out victorious on 16 December 1971 when the Pakistan Army surrendered their weapons and left the newly formed country.

While Bangladesh largely comprises of Muslim communities, its constitution is secular and allows practice of all religions in its soil. Bangladesh is a country with abundant prospects – its fertile land, the rising garments and telecommunication sector, the hardworking people and the rising population all create the most suited environment for attracting investors from all over the world.

The government of the Peoples’ Republic of Bangladesh is led by the Prime Minister while the President is largely a ceremonial post. The Prime Minister chooses the ministers from the members of the parliament. The most senior ministers and the Prime Minister together form the supreme decision making body, ie the Cabinet. The tenure of the government is five years after which a general election will be held for the election of the next government.

It is home to the largest sea beach in the world, Coxs Bazaar; it is home to the Royal Bengal Tigers; it is the only country in the world which fought for its mother language, Bangla, on 21 February 1952 which was later recognised as International Mother Language Day; this country is known as the ‘playground of seasons’- the only country with six seasons in a year.

The legal system of Bangladesh

The Peoples’ Republic of Bangladesh is a common law country and after it attained its independence in 1971, it adopted its own constitution in 1972 under the brave leadership of Father of the Nation Bangabandhu Sheikh Mujibur Rahman. Based on the constitution, the legal system of Bangladesh has taken its shape.

Several laws of Bangladesh such as the penal code, code of civil and criminal procedure, law of evidence, law of contract, company law, etc are based on the English legal system. Family laws, on the other hand, such as laws on marriage, divorce, inheritance, etc are based on religious scripts and thereby varies between different communities.

Doing Business in Bangladesh Graphic

At the apex of the legal system stands the Supreme Court of Bangladesh divided into Appellate Division (AD) and High Court Division (HCD). The HCD hears appeals and revisions from subordinate courts, issues orders and directives against writ petitions to protect the sanctity of the fundamental rights embodied in the country’s constitution. It has the original jurisdiction for admiralty matters, company matters and writ petitions. The HCD has the legal capacity to declare any law passed by the Parliament of Bangladesh as null and void if it does not conform to constitutional principles.

The AD is empowered to hear appeals from the HCD or any other statutory body.

The subordinate civil courts, created under the Civil Courts Act 1887, are divided into five:

  • District Judge Court: It has appellate, revision, transfer, review and reference jurisdiction up to the suit value of Taka 50m.
  • Additional District Judge Court: Its powers are same as that of the District Judge Court but it can exercise such powers only if vested by the District Judge.
  • Joint District Judge Court: It has the original jurisdiction to try cases of suit value from Taka 2.5m to unlimited.
  • Senior Assistant Judge Court: It has the original jurisdiction to try cases of suit value from Taka 1.5m to 2.5m.
  • Assistant Judge Court: It has the original jurisdiction to try cases of suit value less than Taka 1.5m.

The subordinate criminal courts, based on the Code of Criminal Procedure 1898, are broadly divided into two:

  • Sessions Court: It is further divided into three categories-
  • District Sessions Judge Court;
  • Additional District Sessions Judge Court;
  • Joint District Sessions Judge Court
  • Magistrate Court: It is further divided into two categories-
  • Executive Magistrate;
  • Judicial Magistrate: which is further divided into four types:
  • Chief Judicial Magistrate Court;
  • Additional Chief Judicial Magistrate Court;
  • Senior Judicial Magistrate Court;
  • Judicial Magistrate Court.

There are several other specialised courts, including the following:-

  • Labour Courts;
  • Administrative Tribunals;
  • Income Tax Appellate Tribunals;
  • Money Loan Courts (Artha Rin Adalat);
  • Insolvency Courts.

Why invest in Bangladesh?

Bangladesh has been a lucrative place for foreign investment in the recent years after the country has reached political stability, which was a major concern for foreign investors for years, under the current government. As per the 2015 report by United Nations Conference on Trade and Development (UNCTAD), Bangladesh has received $2235m as foreign direct investment (FDI) making Bangladesh the second largest FDI receiver in the South-East Asia. The economists of the country are of the view that the reason behind the rapid growth of the FDI in the country is the outcome of the political stability and investment friendly environment.

The country has a remarkable track record for growth and progress. In the past 30 years the economy of the country has grown at nearly 6% each year. The current government is planning to make Bangladesh a middle income country by 2021, which will call for a growing Gross Domestic Product(GDP) growth to 7.5 to 8% each year.

The government of Bangladesh has entered into agreement with many other countries to avoid dual taxation, which protects the individuals from giving tax on same declared income or assets. At present Bangladesh has this dual taxation agreement with many countries including India, USA, UK, Canada and also with some European countries.

With more than 160 million people, Bangladesh is the world’s eighth largest populated country, among them most are young and hard working, efficient and innovative, which opens the doors for foreign investors in various sectors like energy, garments, technology, pharmacy, tourism, etc. Another significant aspect for investors is the cheaper labour force of Bangladesh, which enables them to get the good quality of products at a cheaper cost.

Industry is the backbone of a country’s economy. As a developing country, Bangladesh needs a strong yet realistic industrial policy in order to achieve the expected GDP before 2021. The government of Bangladesh has recently approved the Industrial Policy 2016 which has replaced the previous policy of 2010. This policy has categorised the investing sectors in two segments. One is high priority, which includes garment sectors, agriculture and food processing, ICT and software, pharmaceuticals, leather industries and leather products, light engineering industries, and jute and jute products. On the other hand, the priority category includes plastic, shipping, tourist, tea, polymer, cement, herbal medicine, automobile industries, etc. This policy has also given special motivations towards non-resident Bangladeshis by giving the same amenities as are given to foreign investors. The government will also constitute an industry investment mutual fund for non-residents under the management of IECB to motivate non-residents to invest in Bangladesh.

The major sectors

Agriculture

This sector employs the largest amount of people in Bangladesh. 47.5% of the population are directly employed in this sector while 70% are dependent on it in one way or another. While the agricultural sector of Bangladesh is a strong indicator of its economic growth, its importance and contribution in the country’s Gross Domestic Product (GDP) has declined gradually as other sector overtook it in terms of exports and revenue earning.

Doing Business in Bangladesh Graphic

In order to achieve the goals assigned under the Millennium Development Goals and to become a middle-income country by the year 2021, GDP growth of 7% every year would be required and thus the importance of agriculture cannot be ignored at any cost. A constant growth rate of 4-4.5% per year would have to be ensured in the agricultural sector to acquire the desired goals. The government of Bangladesh is yet again focusing on the production of jute products which is projected to yield considerable export revenues for the state.

Energy

With the growing population, the demand for electricity has reached sky-high levels. Accordingly, the government has taken measures which have more than doubled the power generation capacity from 4,942MW in 2009 to around 12,000MW currently. 70% of the population now has access to electricity.

Doing Business in Bangladesh Graphic

There is huge investment potential in the investment sector as the government is now introducing many attractive investment policies to indulge the foreign investors in this sector. More and more power plants, transmission and distribution lines are being set up. It is estimated that over $5.2bn has been injected into this sector to create around 70 power plants in the span of seven years. Further investments are expected to be injected in the economy from investors from China, Japan, India, etc.

The importance of an uninterrupted power supply is significant in order to achieve holistic economic growth. In order to meet the growing demands, the government has undertaken some short-term goals along with long term plans. Short term plans include rental power and small independent power producers (IPP). Around 500MW of electricity is being imported from India.

Bangladesh seeks to provide electricity to every nook and corner of the country by 2021. It is expected that over 9,600MW electricity will be generated by the year 2018 under short, medium and long-term government plans.


Textiles

In Bangladesh, exports of textiles and garments are the leading source of foreign exchange earnings. The revenue of the textile sector in Bangladesh contributes to the economy in considerable rate. Bangladeshi products enjoy duty free market access or reduced tariff rate facilities to export from various developed and developing countries in the world, namely the European Union, Canada, Australia and some Asian countries, including Norway, Switzerland, Canada, Japan, Australia and partial market access in India, China, South Korea, Malaysia, etc.

Doing Business in Bangladesh Graphic

Various types of garments that are manufactured in Bangladesh but ready-made garments are classified into two broad categories, one is woven products and another is knitted products. Woven products include shirts, pants and trousers. Whereas, knitted product includes t-shirts, polo shirts, undergarments, socks, stockings and sweaters. Woven garments still dominate the export earnings of Bangladesh. From the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) website it can be seen that, day by day knitted item production is increasing at a considerable rate and now about 40% of export earnings have been achieved from knitted products. The apparel industry took the export earnings from $31.57m in 1983 to $21.5bn in 2013. The RMG sector is a $22bn industry that accounts for 79% of the country’s export earnings and contributes 10% to the national economy. Around 4.4 million people are employed in the RMG sector, 80% of which are women. The predominant textile industry in the early days was not so strong. But considering the current state Bangladesh is self-sufficient for knitting fabric as more than 90% of knitwear fabric within the country. Besides, currently the country has around 9 million spindles installed that can produce up to 1.7 billion kilos of yarn per year. Besides, currently the country has around 9 million spindles installed that can produce up to 1.7 billion kilos of yarn per year. Considering all of the above statistics, it can be said that the garment industry in Bangladesh has groomed itself to be one of the best in the world.

Pharmaceuticals

The pharmaceuticals sector in Bangladesh is small but is the most developed sector in Bangladesh. Bangladeshi-made medicines are currently exported to 90 countries in Europe and the Middle East, earning in the fiscal year 2015-2016 about $16.8bn, of which $37.9m was from the export of medicines only. The Bangladesh medicine exporters brought into the country, in the fiscal year 2014-2015, about $72.6m.

To flourish the sector more, manufacturer are investing more and new pharmaceuticals industries are establishing themselves in to the sector, increasing the import of capital machineries by 25% from July to October 2015.

The World Trade Organisation (WTO) has granted least-developed countries, such as Bangladesh, relaxation on intellectual property rights until 2033. For such relaxation the country can manufacture and sell medicines for another 17 years without expending on intellectual property rights. A medicine that is expensive abroad will be available in Bangladesh for half the price charged abroad. Such growth in the market shall take the sector to better days, and through the earning of foreign currency, it has the scope of becoming one of the largest foreign currency earners like that of the garments sector.

Telecommunication

The telecommunication sector of Bangladesh adds up to 8%+ growth in the economy of the country. There are opportunities for companies to partner up with the government and establish public-private partnership projects to provide services to customers.
The government of Bangladesh enacted the Telecoms Policy 1998 in order to liberalise the telecoms sector. The main concern of enacting this policy was to create an environment of competition at a competitive and reasonable price. The government has also enacted legislations in order to ensure a level playing field for all operators in multi-operator environment.

Doing Business in Bangladesh Graphic

Bangladesh has made itself attractive as a field of major foreign investment, as it is portraying itself as a significant hub for telecoms. Bangladesh, being a densely populated country, has a huge demand base which naturally opens up scope for foreign investments.

Information and communication technology

For a developing country like Bangladesh, information and communication technology (ICT) plays an important role. The need to invest in the ICT sector is paramount. The government authority responsible for the development and promotion of the ICT sector is the Ministry of Science and Information & Communication Technology. The Bangladesh Computer Council (BCC) is the supreme body for promotion of all kinds of ICT activities in the country, which works under the Ministry of Science and Information & Communication Technology. Effective legal framework is of crucial importance to help the ICT sector flourish in the country. Suitable legal reforms by the government enabled the creation of an ICT-friendly legal environment, attracting more investment in the sector.

Local ICT companies in Bangladesh have the opportunity to enter into joint venture agreements with foreign companies. For promoting software export an ICT Business Promotion Council has been set up under the Ministry of Commerce and a Business Promotion Office has been set up by Export Promotion Bureau at Silicon Valley, USA.

Recently there has been a huge increase in the demand for skilled ICT professionals in Bangladesh. Considering such, the government has taken various steps for human resource development in the ICT sector, by introducing many programs for individuals, so that skilled workers can be availed for both local and foreign investors.

Legal protection and assistance for investors

The government of Bangladesh has introduced a number of important legislations in order to assist and protect the foreign investment in the country. Laws such as the Foreign Private Investment (Promotion and Protection) Act of 1980 seek to treat foreign investment reasonably and equitably, as a result private investors will benefit from the full protection and precautions of the country.

The Bangladesh Export Processing Zones Authority Act of 1980 created an authority, namely the Bangladesh Export Processing Zones Authority (BEPZA), which refers to areas allocated by the government solely for the investors willing to invest in the export sector of Bangladesh. BEPZA allots or leases lands in these zones to investors to build the infrastructure for their business upon meeting BEPZA standards.

The Companies Act of 1994 deals with how the company will be run and the associated responsibilities and powers of the management of the company. The jurisdiction to settle any dispute in regard to company is the High Court Division of the Supreme Court of Bangladesh.

Bangladesh Economic Zones Authority (BEZA) has been established through the Bangladesh Economic Zones Act 2010 with the aim to set up particular economic zones in all possible areas in Bangladesh with a vision to encouraging quick economic growth.
Besides these there are other policies, including, the Private Economic Zone Policy 2015, Plot Allocation Policy in BSCIC Industrial Estate 2010, Policy and Strategy for Public-Private Partnership (PPP) 2010, etc, which are also enshrining the legal protection for foreign and local investment in Bangladesh.

Foreign private investment is welcome in most areas of the economy of Bangladesh. Legislation offers incentives for investors, which includes allowing 100% foreign equity, tax exemptions in some cases, foreign entrepreneurs enjoying the same amenities as domestic entrepreneurs in regard to tax holiday, payment of royalty, etc. There are other incentives like obtaining permanent residency in Bangladesh by investing $75,000. By taking these facilities into account, Bangladesh has become an attractive destination for investors. The government agencies are very enthusiastic to help investors who wish to invest in the above mentioned sectors in Bangladesh.

The state institutions

Registrar of Joint Stock Companies and Firms (RJSC)

This is the authority responsible for the registration and formation of companies, trade organisations, societies and partnership firms. It also is responsible for preserving the ownership and other necessary documents in its records. At the apex of the organogram of this organisation stands the Registrar.

RJSC business is split into the following major business processes:

  • name clearance;
  • registration;
  • returns filing;
  • issuance of certified copies;
  • winding up; and
  • struck off.

Board of Investment (BOI)

It is the principal private investment promotion and facilitation agency of Bangladesh. It was established by the Investment Board Act 1989 to encourage investment in the private sector of the economy. The current Prime Minister is the head of this organisation and it is also part of the Prime Minister’s Office.

BOI, among others, offers the following services:

  • counseling service on investment;
  • welcome service for investors;
  • registration and approval of foreign, joint-venture and local projects;
  • registration authority for branch/liaison/representative offices;
  • approving remittances of royalty, technical know-how and technical assistance fees;
  • assistance in obtaining industrial plots;
  • providing necessary facilities and assistance in the establishment of businesses;
  • obtaining approval for work permits for foreign nationals;
  • facilitating utility connections;
  • online registration system (ORS);
  • BOI online service tracking (BOST).

Bangladesh Bank (BB)

This is the central bank of Bangladesh and is the regulatory body of its monetary and financial system. It was established on 16 December 1971, through the Bangladesh Bank Order 1972 – President’s Order No. 127 of 1972 (Amended in 2003). The Chief Executive Officer of this monumental institution is also as the Governor.

The main functions of BB are:

  • formulation and implementation of monetary policy of Bangladesh;
  • formulation and implementation of foreign exchange policy;
  • to hold and manage the official foreign reserves of Bangladesh;
  • authority for issuing Taka;
  • supervising authority for banks and other financial institutions.

BB is regulated by several laws, regulations and guidelines which compliment it to perform its duties in relation to the monetary and fiscal system of the economy. Some of these laws are cited below:

  • Bangladesh Bank Order 1972;
  • Bank Company Act 1991;
  • Bank Company (Amendment) Act 2013;
  • Negotiable Instrument Act 1881;
  • The Bankers’ Book Evidence Act 1891;
  • Foreign Exchange Regulations Act 1947;
  • Foreign Exchange Regulations (Amendment) Act 2015;
  • Financial Institutions Act 1993;
  • Financial Reporting Act 2015;
  • Money Loan Court Act 2003;
  • Money Laundering Prevention Act, 2012;
  • Money Laundering Prevention (Amendment) Act, 2015;
  • Anti-terrorism Act, 2009;
  • Anti-terrorism (Amendment) Act, 2013.

BB regularly issues guidelines and regulations in relation to foreign exchange, governance of banks and financial institutions, money laundering etc.

Securities and Exchange Commission, Bangladesh (BSEC)

This is the prime regulator of the capital market of Bangladesh. It is governed by the Securities and Exchange Commission Act 1993 and has been established on 8 June 1993. It consists of a Chairman and four Commissioners appointed by the government for four years tenure which can be renewed further for one term and not more. The Chairman of the BSEC acts as the Chief Executive Officer (CEO). It is a statutory body attached with the Ministry of Finance.

The functions of BSEC include:

  • regulator of security market;
  • supervisory authority of all the registered entities in the stock market;
  • ensure competitive business environment and fair trade practices;
  • conducting research and publishing information.

National Board of Revenue (NBR)

It is the central authority for administering tax in Bangladesh. It operates under the Internal Resources Division (IRD) of the Ministry of Finance, Peoples’ Republic of Bangladesh. NBR is responsible for collecting tax revenues such as Value-Added Tax (VAT), Customs Duty, Excise Duty and Income Tax. There are five wings that operate under the NBR- Customs Wing, VAT Wing, Income Tax Wing, IT Wing and lastly Research and Statistics Wing. It is the institution which formulates tax policies and tax laws; negotiates tax treaties with foreign governments and actively participates in the inter-ministerial meetings on economic issues relating to fiscal and tax management of Bangladesh.
NBR is regulated by several laws and the following comprise of the most important ones that an investor is usually faced with:

  • Income Tax Ordinance (ITO), 1984 as amended up to July 2015;
  • Income Tax Rules 1984;
  • Customs Act 1969;
  • Value Added Tax (VAT) Act 1991;
  • VAT Rules 1991;
  • Finance Act 2016.

Office of the Chief Controller of Imports & Exports (CCI&E)

The CCI&E plays a significant role in the trade policy formulation of Bangladesh. The main objectives of this organisation are to promote the national trade and generate more revenue for the government. By proper monitoring and supervising the rules and regulations of the trade policy, Government can improve imports and exports activities of the country.

The services rendered by the CCI&E are listed below:

  • Issuance of Industrial & Commercial Import Registration Certificate (IRC);
  • Issuance of Export Registration Certificate (ERC);
  • Issuance of Indenting Registration Certificate (Indenting RC);
  • Issuance of Import cum Export permit;
  • Issuance of Export cum Import permit;
  • Issuance of explanation regarding Import policy.

Bangladesh Standards and Testing Institution (BSTI)

It is an institution which sets the benchmark of quality and dimensions and prepare and promote the general adoption of standards on national and international basis relating to materials, commodities, structures, practices and operations and withdraw, revise, alter and amend them. BSTI also provides or arranges facilities for examination, testing and inspection of commodities, processes and practices for any investigation, research or promotion of export that may be necessary and to issue test reports. Further, it certifies the quality of commodities, materials, produces, products and other things including food irrespective of whether it is for local consumption, for import or export.

Department of Inspection for Factories and Establishment (DIFE)

Its primary function is to approve factory plans and provide the associated permits, registration and licenses for factories. Chief Inspector of Factory and Establishment (CIFE) leads this institution that operates under the Ministry of Labour and Employment which is responsible for ensuring the occupational safety of the workers in factories.

Issues of immigration

In the recent past the complexity of the immigration laws of Bangladesh has been reduced to a great extent in order to relax the concerns of foreign investors trying to employ expatriates and foreigners coming on business trips and/or for tourism, which ultimately leads to an increase in the overall foreign direct investment (FDI).

The applicability of the different types of visa depends upon the purpose of the visitors. The most common visa applications are made for A3 Visa, B Visa, E Visa and T Visa. The procedure and the requirements for applying for these visas are mentioned below:

A3 Visa

The A3 visa is applicable to experts/advisers/officials/staff members/labour working in any project under the bilateral/multilateral agreement between development partner agencies and Bangladesh government.

The visa is issued upon submitting all the required documents to the respective Bangladeshi Embassy along with the recommendation of the Embassy or relevant ministry/relevant government agency.

The length of the visa given is for the period of the employment or five years, whichever is shorter, depending upon the desecration of the visa issuing authority (respective Bangladeshi Embassy).

B Visa

B visa is applicable to businessmen/business representatives.
The visa is issued by the respective Bangladeshi Embassy upon receiving all the required documents along with the recommendation of recognised chambers of commerce or recommendation of the local sponsor in Bangladesh. Embassy issues a visa for a maximum of six months.

E Visa

E Visa is applicable to experts/advisers/employees/individuals in independent bodies or individuals employed in commercial organisations/liaison/industrial/foreign government/local organisations or individuals appointed by the local or foreign organisations.
Upon receiving all the required documents along with the recommendation letter from the concerned ministry in Bangladesh/BOI/BEPZA the Embassy will issue the visa for a maximum period of three months.

T Visa

T visa is applicable for citizens of any country having diplomatic relations with Bangladesh or an individual attending seminar/symposium/study tour. Upon receiving all the required documents the Embassy will issue the visa for a maximum of two months.
All the above visas can be extended upon expiry. The visa holder can apply for the extension of the visa to the Department of Immigration and Passport (DIP).

How to set up an entity?

Company or joint venture incorporation

As per the Companies Act 1994, there are mainly three types of companies:

  • companies limited by shares,
  • companies limited by guarantee; and
  • companies with unlimited liability.

The most common form of company in Bangladesh is a company limited by shares. Companies Act 1994 does not provide the step-by-step procedure on how to set up a company as it is mainly dealt by the Registrar of Joint Stock Companies and Firms (RJSC), the Company House of Bangladesh.

The steps for the registration of a private company limited by shares in Bangladesh are detailed below:

  1. Name clearance – it is an online process where the applicant has to make an application for name clearance. A nominal amount has to be deposited into the bank prescribed by the RJSC website. The name clearance is valid for 180 days and it is recommended that the company is formed within this time, otherwise a new name clearance will have to be conducted.
  2. Documentation – The following documents would be required to be submitted to RJSC for their verification:
    1. memorandum and articles of association of the company;
    2. promoters' resolution to open a company in Bangladesh;
    3. obtaining and executing the following forms for registering the company with RJSC:
    • filled in form I: declaration on registration of company;
    • filled in form VI: notice of situation of registered office;
    • filled in form IX: consent of director to act;
    • filled in form X: list of persons consenting to be directors;
    • filled in form XII: particulars of the directors, manager and managing agents.
  3. Banking formalities
    1. The promoter shall open a temporary bank account in the name of the proposed company with any scheduled bank with the condition that the account shall be regularised once the company is duly registered with RJSC;
    2. capital contribution into the bank account; and
    3. obtain encashment certificate from the bank which states that the amount required for capital contribution has been duly remitted in the temporary bank account of the proposed company.
  4. Registration
    1. in order to register the company with the RJSC, registration fee and stamp duty has to be paid in the prescribed bank of RJSC;
    2. such government fee shall be determined based on the authorised share capital of the proposed company;
    3. upon successful completion of all the formalities, a certificate of incorporation has to be obtained from the RJSC.
    • post-registration formalities include obtaining the following certificates/licenses:
    • Tax Identification Number;
    • value added tax (vat) certificate;
    • trade license;
    • fire license.

Branch/liaison/representative office

Permission of Board of Investment (BOI) will be required in order to set up a branch office/liaison office/representative office and the foreign investor intending to set up a branch office/liaison office/representative office is required to submit application in the prescribed form along with the following documents, which must be attested by the Bangladesh Embassy/High Commission of the country of origin or Apex Chamber of Commerce of the country of origin:

  1. prescribed application form, duly filled in, signed and sealed,
  2. memorandum of association (MoA) and articles of association (AoA) of the principal company;
  3. certificate of incorporation of the principal company;
  4. name and nationalities of the directors/promoters of the principal company;
  5. board resolution to open a branch/liaison/representative office in Bangladesh;
  6. audited accounts of the last financial year;
  7. proposed organogram of the office showing the posts to be occupied by expatriates as well as local personnel;
  8. list of activities of the proposed office on the company letterhead.
As per the BOI guidelines, the establishment procedure of branch office, liaison office and representative office is more or less same. The offices will be required to provide an inward remittance of at least $50,000 in a period of two months after the permission letter has been issued along with six months of operational expenses.

Partnership

It is a form of business organisation formed with minimum of two and maximum of 20 persons. It is entered into between the partners through a voluntary agreement or contract which can be either expressed or implied the objective of which shall be to share profits of the business. The law governing the registration of a partnership business is the Partnership Act 1932.

The Partnership Act 1932 does not require a partnership deed or agreement to be registered. The registration of such firm is optional. However, it is recommended that it be registered so that it can enjoy some legal rights and facilities.

In order to register a partnership in Bangladesh, the following information/documents are needed:

  • proposed business name;
  • partnership agreement duly notarised;
  • form I;
  • details of the partners and partnership business (address, etc);
  • percentage of the share of profit of each partner.

A partnership is registered with the Registrar of Joint Stock of Companies and Firms (RJSC). The steps for the registration of a partnership in Bangladesh are detailed below:

  1. Name clearance – the name shall be unique. The name clearance is an online process to be completed through the RJSC website.
  2. Partnership deed – the deed must have all the details of partners, nature of business, duration of partnership, each partners’ capital contribution in the business, profit sharing ratio between partners, process of dissolution etc. The deed shall be executed by all partners on non-judicial stamp paper in accordance with the Stamp Act 1899 after which it has to be notarised.
  3. Registration – all the documents and completed forms are required to be filed with RJSC which will then be reviewed by the RJSC officials and if everything is in order, the officials shall issue a Certificate of Registration.

Licenses, permits and certificates

Environment Clearance Certificate

Environment clearance certificate is provided by the Department of Environment (DOE), Bangladesh. The laws regulating the requirements to obtain this certificate are the Bangladesh Environment Conservation Act (ECA) 1995, the Environment Conservation (Amendment) Act (ECAA) 2010, and Environment Conservation Rules (ECR) 1997.

It is mandatory to obtain environmental clearance for each and every type of industry and project as per Bangladesh ECA 1995 and ECAA 2010. An Environmental Clearance Certificate can be classified into the following four categories:

  • Green;
  • Orange-A;
  • Orange-B; and
  • Red.

Environmental clearance for Green category industries and projects is provided through comparatively simple procedure. In case of Orange-A, Orange-B and Red category industries and projects, site clearance is mandatory at the beginning, then EIA approval and finally environmental clearance is issued.

For industrial units and projects falling in the Orange-A, Orange-B, first a site clearance certificate and thereafter an environmental clearance certificate shall be issued. In case of Red category industries, firstly a location clearance certificate, then environment impact assessment (EIA) approval and thereafter an environmental clearance certificate shall be issued.

The environment clearance is to be renewed after three years for Green category and one year for Orange-A, Orange-B and Red category industries.

Import registration certificate (IRC – commercial)

A Commercial IRC is a very important certificate to be obtained by investors who need to import products or machineries. After obtaining this certificate, the importer can import any permissible item without any restrictions on value and quantity. It has to be renewed annually. It has to be obtained from CCI&E under the Ministry of Commerce of Bangladesh.

The documents required to obtain the commercial IRC are listed below:

  1. passport size photograph of the entrepreneur/managing partner/managing director;
  2. valid trade license;
  3. valid membership certificate from a local Chamber of Commerce and Industry or from concerned trade associations;
  4. financial solvency certificate;
  5. citizenship certificate;
  6. treasury challan;
  7. TIN certificate;
  8. partnership deed;
  9. certificate of incorporation, memorandum and articles of association.

Export registration certificate (ERC)
ERC is a certificate granted by the CCI&E operating the under the Ministry of Commerce of Bangladesh. After obtaining this certificate, an exporter can export any quantity of goods at any price from Bangladesh. It also has to be renewed annually.

The documents required to obtain the commercial IRC are listed below –

  1. passport size photograph of the entrepreneur/managing partner/managing director;
  2. valid trade license;
  3. valid membership certificate from a local Chamber of Commerce and Industry or from concerned trade associations;
  4. financial solvency certificate;
  5. citizenship certificate;
  6. treasury challan;
  7. TIN certificate;
  8. partnership deed;
  9. certificate of incorporation, memorandum and articles of association.

Trade license (commercial firms)

A trade license is a license required by law of Bangladesh for every business entity, eg sole proprietorship, partnership, company, etc that is legally operating here. In the cities it is issued by the respective city corporation. Multiple trade license might be required where the business has more than one location. It has to be renewed annually and it attracts government fees depending on the nature and type of business to be conducted.

The following documents would be required in order to apply for the trade license for commercial firms:

  1. application form
  2. national ID card of the entrepreneur;
  3. rent receipt or ownership proof;
  4. holding tax payment receipt;
  5. passport size picture of the entrepreneur;
  6. declaration on non-judicial stamp paper;
  7. memorandum and articles of association;
  8. certificate of incorporation (if applicable);
  9. Agreement of Partnership (if applicable);
  10. work permit from BOI (if applicable);
  11. bank solvency certificate; and
  12. TIN certificate.

Trade license (manufacturing firms)

A trade license is a license required by any business entity in Bangladesh to operate legally in its soil. Although the procedure for obtaining trade license for commercial and manufacturing firms is the same, the documents required in case of manufacturing firms is much more compared to that of the commercial firms essentially because of the nature of operation of the former. It also has to be renewed annually and it attracts government fees depending on the nature and type of business to be conducted.

The documents required to obtain a trade license for manufacturing firms are stated below:

  1. application form;
  2. national ID card;
  3. rent receipt or ownership proof;
  4. holding tax payment receipt;
  5. passport size picture of the entrepreneur;
  6. declaration on non-judicial stamp paper;
  7. memorandum and articles of association;
  8. certificate of incorporation (if applicable);
  9. agreement of partnership (if applicable);
  10. work permit from BOI (if applicable);
  11. bank solvency certificate;
  12. TIN certificate;
  13. NOC declaration from the locality;
  14. location map;
  15. sketch along with details of the proposed factory;
  16. fire license; and
  17. environment clearance certificate.

TIN certificate

TIN (taxpayer’s identification number) is a unique number for each tax payer, ie individual or company, of Bangladesh provided by the NBR. With the notion of ‘Digital Bangladesh’, online application for e-TIN certificate is now available. It is a certificate that is needed by every individual who is required to pay tax in Bangladesh. It does not require renewal unlike many other certificates discussed in this guide.

Income Tax Ordinance (ITO), 1984 as amended up to July 2015 and Income Tax Rules 1984 are the governing laws of taxation in Bangladesh.

Requirements to be met in order to obtain TIN certificate are as follows:

  1. name of the applicant;
  2. mobile phone number;
  3. incorporation number of the company (if applicable);
  4. date of incorporation of the company (if applicable);
  5. trade license (if applicable);
  6. national ID/passport.

VAT registration certificate

With time, value added tax (VAT) has become one of the major sources of revenue for the government of Bangladesh. VAT registration certificate is issued by the NBR operating under the Ministry of Finance, Bangladesh. VAT certificate has to be obtained by each business entity that is required to pay VAT by law.

Value Added Tax (VAT) Act 1991 and VAT Rules 1991 are the governing laws of VAT in Bangladesh.

Documents required to obtain VAT registration certificate are stated below:

  1. trade license;
  2. TIN certificate;
  3. IRC/ERC;
  4. list of invoice and stored product;
  5. passport size photos;
  6. deed of agreement;
  7. bank solvency certificate;
  8. BOI registration; and
  9. memorandum and articles of association.

BOI registration (local and foreign investment projects)

Investment projects in Bangladesh, either local or foreign, has to be registered with the BOI in order to obtain various monetary and non-monetary benefits from the government of Bangladesh.

The documents required for registration with BOI for local investment projects comprise of:

  1. prescribed application form;
  2. trade license;
  3. certificate of incorporation;
  4. memorandum and articles of association;
  5. deed of proposed land;
  6. project profile;
  7. background of directors or partners;
  8. pay order or bank draft of registration fee;
  9. TIN certificate.

The documents required for registration with BOI for foreign investment projects comprise of:

  1. prescribed application form;
  2. trade license;
  3. certificate of incorporation;
  4. memorandum and articles of association;
  5. deed of proposed land;
  6. joint venture agreement;
  7. project profile;
  8. list of shareholders/directors;
  9. list of machinery;
  10. encashment certificate;
  11. pay order or bank draft of registration fee;
  12. TIN certificate.

Fire license

Considering the environment and to ensure the safety of the establishment along with the workers engaged in the business, it is mandatory for buildings and business organisations to obtain a fire license. It is issued by the Fire Service and Civil Defense (FSCD) authority operating under the Ministry of Home Affairs, Bangladesh.

The documents required to be submitted in order to obtain a fire license are as follows:

  1. prescribed application form;
  2. trade license;
  3. yearly valuation certificates;
  4. deed of agreement;
  5. layout of the establishment;
  6. certificate of incorporation;
  7. memorandum and articles of association;
  8. no objection certificate from the local authority;
  9. clearance certificate from the FSCD office;
  10. deposit slip/treasury challan.

Certification mark (CM) license

BSTI has the responsibility to specify a standard mark to be called the BSTI certification mark which shall be of such design and contain such particulars as may be prescribed to represent a particular Bangladesh standard. It is a license which has to be renewed after every three years and is issued by the BSTI operating under the Ministry of Industries, Bangladesh.

In order to obtain the CM license, the following documents would be required:

  1. trade license;
  2. permit from BOI
  3. trade mark registration application;
  4. label or packet of the product;
  5. TIN certificate;
  6. VAT certificate;
  7. environment clearance certificate;
  8. premises license;
  9. letter of credit;
  10. invoice;
  11. bill of entry;
  12. import registration certificate (IRC);
  13. radiation certificate (if applicable);
  14. license from District Commissioner;
  15. flow sheet;
  16. list of machineries in factory;
  17. bio-data of the chemist.

Approval of factory plan and registration for factories and establishment

Every factory operating in Bangladesh, in order to function legally, must obtain approval of its plan and must register with the DIFE, operating under the Ministry of Labor and Employment, which is the sole authority for providing the approval and certificate of registration for factories. It is subject to renewal every financial year.

The documents required for issuance of the approval and the certificate of registration comprise of the following:

  1. land document;
  2. site plan/layout/master plan;
  3. detailed construction plan;
  4. machine layout and flow chart of manufacturing process;
  5. trade license;
  6. electricity demand note;
  7. fee payment slip;
  8. certificate of incorporation;
  9. articles and memorandum of association.

Intellectual property

In this era of globalization, the use of intellectual property law has become a necessary instrument to help protect the rights of creators or owners. The world revolves around the foundation of innovation, creativity, art, production of goods and services, and where the world market is no longer distinct or isolated, rather it is more compact and competitive; and in the light of all these circumstances the need to protect intellectual property rights is a matter that is completely undisputed. Followings are the three limbs of intellectual property law which seeks to ensure overall protection of all types of product, all three limbs differ from each other mainly on the point of diversified nature of the products, as each limb help preserves only the right of certain categories of products.

Copyright

Copyright law mainly deals with the issues of having the rights associated with the product registered or reserved in the name of the author or its creator. It basically help protects the original works of the owner while giving a right of being unique with the product.
The examples of product that the law of copyright tends to cover are mainly those, which deal with authorship, such as literature, scientific research or products, art or music, movies, etc.

Although it is an emerging sector of law in Bangladesh, the current copyright related law gives sufficient protection. The law for copyright issue is the Copyright Act 2000 and Copyright (Amendment) Act 2005. The Act supersedes the entire procedure for registration of copyrights; however, the procedure may slightly differ with the different types of products being registered.

The documents that are mainly required are:

  • three copies of the filled application form;
  • attachment of the product details;
  • bank fees, which shall depend on the types of products;
  • acknowledgment on a non-judicial stamp;
  • passport or NID for individuals, additional trade license and articles of association and memorandum of association are required for companies.

The punishment for violation of copyright law at its maximum can held for four years imprisonment and a BDT 200,000 fine.

Trade mark

Trade mark law deals with symbols, word, signatures, designs or logos that help generate business through branding. Branding is a great reason why business complies with trade mark law because there is always a possibility of swindling use of such trademark authorities in products to manipulate or degrade the branding of businesses.

The current trademark legislation would be The Trade Marks Act 2009. An application for the registration of the trademark shall have;

  • name of the symbol;
  • identity of the applicant;
  • occupational state of the applicant;
  • identification of the product;
  • date of use of the symbol.

Patent and designs

Patent law comes into action whenever it is about an innovative product dealing with production and sale.

The Patents and Designs Act 1911 is the concerned law for patent registration. An application for a patent shall be executed with a content of a declaration to the effect that the applicant is in possession of an invention and claims to be the true and first inventor, and must be accompanied by complete specification of the products.

A complete specification must particularly describe the types of innovation and the nature of the invented product. It is better to have the specification outlined in more detailed manner to have wider claim. The specification must contain: a) title b) detailed specification c) distinct statement of the invention claimed.

Labour regulations

The labour market of Bangladesh is one of the major attraction for foreign investors due to cheap wage rate and availability of skilled labour. In order to safeguard the interest of the labourers, the government has implemented several laws and regulations recently. The labour laws are governed by the Bangladesh Labour Act 2006 as amended in 2010 and 2013 and Labour Rules 2015. The important aspects of the labour laws are discussed below:

Employment
Every employer shall employ workers by giving anappointment letter and identity card and maintain a service book for each employed worker.

Every establishment can have its own service rules regulating the employment of the workers but it shall not contradict provision of the labour laws and such service rules must get prior approval from the Chief Inspector.

Termination

A permanent employee may be terminated by giving the employee in writing 120 days’ notice or four month wages in lieu of notice in case of a monthly rated employee and 60 days’ notice or two months wages in lieu of notice in case of other workers.

The employment of a temporary employee may be terminated by giving the employee, in writing, 30 days’ notice or one month wage in lieu of notice in case of a monthly rated employee and 14 days’ notice or 14 days’ wages in lien if the notice in case of other workers.

Minimum wages

he minimum wages are fixed by the Minimum Wages Board and currently the Board has fixed the minimum wage rates for 41 industries. The rate is binding on all the concerned industries and any deviation or non-compliance shall result in penalties being imposed on the business in question.

Working hours and leave

The daily working hours and the weekly working hours for an adult worker shall not be more than eight hours and 48 hours respectively.

The workers are entitled to 10 days casual leave, 14 days sick leave, 11 days festival holidays and annual leave depending upon the period of employment with full wages.

Maternity leave

Every woman is entitled to maternity leave and benefit from a period of eight weeks before the expected day of her delivery and eight weeks following the day of her delivery.

Dispute resolution

The dispute, if any, arises between the employers and the employees shall be tried to be settled at first through mutual correspondence and/or negotiation. If the dispute cannot be settled then either party can apply to the Labour Court to resolve the dispute.

Tax and customs regulations

The taxation in Bangladesh can be differentiated into three, namely, income tax, value added tax (VAT) and customs duties. Income Tax Ordinance 1984 and Income Tax Rules 1984 regulate the income tax of Bangladesh. VAT is governed by the VAT Act 1991 and customs duties are governed by the Customs Act 1969.

The tax year in Bangladesh for companies other than financial institutions is from July to June. With regards to income tax, a private company limited by shares has to pay corporate tax at 35%. Branch offices are given the same status as a private limited company and taxed at the same rate. Liaison office cannot undertake commercial activity and tax rate is nil, although tax return is to be submitted. On an individual capacity, non-resident is taxed at maximum rate of 30% while residents have to pay tax on a lower slab based progressive tax rates. Non-residents are those people who spend less than 182 days in an income year but there are some provisions for a person who spends at least 90 days in Bangladesh. Upon application, each person or company has to obtain a taxation identification number which allocates him to specific taxation authority. Company has to obtain permission from competent authority before employing a foreign employee. An entity also has the responsibility to deduct taxes at source before making any payments.

With regards to VAT, there is VAT at several rates with truncated rates. Generally the rates are around 15% which has to be paid generally on a monthly basis. Besides, the entities also have a responsibility to deduct VAT at source while making payments pertaining to certain sectors. However, VAT as well as taxes has been exempted in a number of sectors for companies entering into a PSC agreement with the government.

The customs duties in Bangladesh vary from product to product and are determined by the Finance Act promulgated each year.

Legal Developments in Bangladesh

Legal Developments and updates from the leading lawyers in each jurisdiction. To contribute, send an email request to
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