Company Registration in Bangladesh
Several types of Legal entities available in Bangladesh i.e. Private Limited Company, Public Limited Company, Subsidiary Company, Branch office (foreign owned), Representative Office (foreign owned) etc. A private limited company is the most common type of entity in Bangladesh. It is a separate legal entity and shareholders are not liable for the company’s debts beyond the amount of share capital they have contributed. Any person (foreign or local) who is above 18 is eligible to register a company.
KEY FACTS ABOUT COMPANY FORMATION
Company Name
Before incorporation of a company in Bangladesh, the name of the company must be approved(cleared) for use.
Directors
As per the Companies Act, 1994 there must be minimum of two directors for a company. This requirement is for a private limited company. For a public limited company, the requirement of minimum number of directors is more. The directors must be more than 18 years of age and not be bankrupt or criminally convicted of any form of act. A shareholder which is not a natural person (i.e. a company) can select nominee director.
Shareholders
Usually before opening the company, the requisite number of shareholders must be appointed. For a private limited company, the number of shareholders appointed must be two and maximum of 50 shareholders. A director and shareholder can be the same or a different person. The shareholder can be a person or another legal entity such as another company. 100% local or foreign shareholding is allowed in most sectors. New shares can be issued or existing shares can be transferred to another person any time after the Bangladeshi company has gone through the incorporation process.
Authorized Capital
The amount of capital which is subscribed to the Memorandum of Association and Articles of Association must be mentioned. It is the maximum amount of share capital that the company is authorized to issue (allocate) to shareholders. Part of the authorized capital can remain unissued. There is no minimum or maximum limit for authorized capital in Bangladesh. However, if the applicant wants to hire a foreign worker or foreign employee, then a remittance of USD 50,000 must be stated in the authorized capital of the company.
Paid-up Capital
The paid-up capital for a company which is incorporated in Bangladesh is 1 Taka for a local company and a foreign owned company USD 50,000. This would be considered as the share capital of the company which can be increased any time after the incorporation of the company.
Registered Address
In order to register a company in Bangladesh, you must provide a local address as the registered address of the company. The registered address must be a physical address (can be either a residential or commercial address) and cannot be a P.O. Box.
Memorandum and Articles of Association
The company to be incorporated must prepare a memorandum of association (MoA) and articles of association (AoA).
Step by step process to form a Company:
- Name Clearance:
– Name Clearance (NC) is a pre-requisite for registration of a new entity (other than Foreign Company and Partnership Firm). The promoters of a new entity need to apply for and get name clearance for the entity prior to applying for registration.
– At present NC can be obtained online using the joint stock website at roc.gov.bd which is a fairly simple process
– The name clearance remains valid for ninety (90) days from the date of issue.
- Drafting the Memorandum and Articles of Association:
It is of vital importance to draft a solid and consolidated constitution document of the company. The Memorandum of the Company should state the primary business objectives, the amount of paid-up capital & authorized capital, and state the list of the shareholders along with their respective shareholdings. It is to be noted here Bangladesh does not allow a One Person Company (OPC) and a minimum of two (2) shareholders are required to set up a private limited company. However, in the case of a public limited company, the total number of shareholders required is seven (7). Recently the government has also allowed the opening one-person company and you can browse through our article on the subject.The Articles of Association of the Company should include the list & number of the directors, power of the board, power of the Managing Director, meeting process, quorum, notice procedure, appointment of auditors etc. The minimum number of directors for private ltd company is two (2) for public ltd company is three (3).
Directors are required to hold minimum one share (qualification share) in the Company; however, the qualification share requirement is relaxed in case Directors who are nominees of corporate entity shareholders. Also, it is possible to appoint Independent Directors.
- Opening of a bank account:
This step is only applicable if the proposed company has foreign shareholding.
Next, you will have to open a bank account in the proposed company name with any scheduled bank in Bangladesh. After opening the account, you will have to remit money equal to the shares to be owned by the foreign shareholder from outside Bangladesh in the account. The Bank will issue an Encashment Certificate which will be required by RJSC for incorporation.
- Submission of documents to the RJSC:
In this step, you have to submit all the required papers to the RJSC and pay the registration fees. You can also look into RJSC for the incorporation certificate during the standard process time.
- Additional Licenses and Registrations:
By this time, you have the certificate of incorporation, Articles of Association (AoA) and Memorandum of Association (MoA), and you have a newly registered company in Bangladesh.
You also need to proceed to some additional licenses and registrations:
- Trade License
- Tax Identification Number (TIN)
- VAT Registration Certificate
- Fire Certificate
- Environmental Clearance Certificate (if necessary)
