Foreign Subsidiary Company Registration Process in Bangladesh

Establishing a foreign subsidiary company in Bangladesh presents a promising opportunity for foreign investors due to the lack of restrictions on commercial activities and the potential for significant profit. This comprehensive guide outlines the steps and required documentation necessary for setting up a subsidiary company in Bangladesh, ensuring you have all the information needed to make informed decisions.

Understanding a Subsidiary Company in Bangladesh

A subsidiary company is a type of private limited company primarily owned by another corporate entity. This structure allows the subsidiary to declare profits and conduct business activities independently within Bangladesh. A foreign company can wholly own a subsidiary company.

Characteristics of a Foreign Subsidiary Company in Bangladesh

A subsidiary company operates as an independent limited liability entity, separate from its parent corporation, allowing it to conduct business activities autonomously without direct interference. In Bangladesh, a subsidiary is treated as a local entity, benefiting from domestic business regulations, tax breaks, exemptions, and other incentives. A company is classified as a subsidiary if another entity controls more than 50% of its voting securities or manages the composition of its board of directors. The parent company’s control is evident if it can appoint or remove directors without the subsidiary’s members’ approval. Despite this connection, the parent company’s liability is limited to the capital invested in the subsidiary, as the subsidiary is responsible for its own debts and losses, protecting the parent from direct financial risk. Additionally, the subsidiary can own property in its name, manage real estate investments, and has the legal capacity to sue or be sued independently. To comply with legal requirements, the subsidiary’s name must include “Limited,” “Private Limited,” or “Ltd,” signifying its status as a private limited company.

Statutory Requirements for a Foreign Subsidiary Company in Bangladesh

• Directors: The minimum number of directors required is two, and the maximum is fifty. This provides flexibility in the management structure.
• Shareholders: There must be at least two shareholders, but no more than fifty, allowing for a range of ownership structures.
• Share Capital: Each shareholder must have a minimum share capital of BDT 1, making the entry barrier low for shareholders.
• Foreign Ownership: 100% foreign directors and shareholders are permitted, encouraging international investment. As per banking practice usually, the Company keeps two directors and the smooth bank account opening a local director.
• Mental and Legal Competence: All directors and members must be of sound mind and at least eighteen years old, ensuring competent management.
• Registered Address: A registered address within Bangladesh is mandatory for legal and correspondence purposes.
• Auditor Appointment: An auditor must be appointed within 30 days of incorporation to ensure financial transparency and compliance.
• Annual Compliance: The company must submit audited accounts, hold annual general meetings, file tax returns, and meet other annual compliance requirements.

Pros and Cons of a Subsidiary Company in Bangladesh

Pros

• Flexibility in Business Activities: The subsidiary can engage in any type of business, offering flexibility and opportunity for diversification.
• Limited Liability: Shareholders are only liable up to the amount of their capital investment, protecting personal assets.
• Brand Leverage: The subsidiary can benefit from the parent company’s established brand image, aiding market entry and customer trust.
• Ownership Transfer: Shares can be easily transferred, allowing for straightforward changes in ownership or new investment opportunities.
• Perpetual Succession: The company continues to exist regardless of changes in directors or shareholders, ensuring business continuity.

Cons

• Stringent Guidelines: Compared to liaison or branch offices, subsidiary companies face stricter regulations and more complex procedures.
• Remittance Restrictions: Equity investments cannot be remitted back to the parent company until the subsidiary is dissolved or the share is transferred to someone following any acquisition.

Required Documents for Setting Up a Foreign Subsidiary Company in Bangladesh

For Non-Operating Bank Account:

Several documents are required to open a non-operating bank account. First, a Name Clearance Certificate issued by the RJSC (Register of Joint Stock Companies and Firms) is needed to confirm the company name’s uniqueness and approval. Additionally, draft copies of the Memorandum of Association (MOA) and Articles of Association (AOA) must be provided, outlining the company’s objectives and internal governance structure. The promoters’ meeting minutes or a board resolution documenting decisions regarding the subsidiary’s establishment are also necessary. Furthermore, three copies of photographs and national ID or passport copies of all shareholders and directors must be submitted, along with a signed and completed bank account application form.

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For Corporate Shareholders:

• Share Tree Analysis: Documentation outlining the ownership structure of the corporate shareholder.
• Passports and Photographs: Identification documents of all shareholders of the parent company and nominee directors.
• Corporate Documents: Incorporation certificate, MOA, AOA, and the previous fiscal year’s audit report of corporate shareholders, all translated into English and notarized.

For Company Registration:

• Required Documents for Company Registration

  An application needs to submit their following information with RJSC https://roc.gov.bd/

  • Name Approval Certificate from RJSC.
  • MOA and AOA of the proposed company.
  • NID or Passport Copies of all shareholders.
  • Bank Account Application for opening a non-operating account.
  • For corporate shareholders, Incorporation Certificate, MOA, AOA, and last year’s audit report are required.

Step-by-Step Process Involving Foreign Subsidiary Company Registration in Bangladesh

Step 1: Name Approval:

1. • Choose a Name: Select a suitable name for the subsidiary.
   • Apply Online: Submit the name approval application through the RJSC web portal.
   • Pay Fees: Deposit the required government fees at the bank.
   • Obtain Certificate: Receive the name clearance certificate from RJSC.

Step 2: Drafting Required Documentation:

1. • Prepare MOA and AOA: Draft the Memorandum and Articles of Association.
   • Complete Forms: Fill out Form IX (Consent of the Directors) and Form VI (Notice of Registered Address).
   • Meeting Minutes: Record the promoters’ meeting minutes or board resolutions.

Step 3: Opening a Non-Operating Bank Account:

1. • Open Account: Set up a non-operating bank account to receive inward remittances.
   • Receive Remittance: Transfer the initial paid-up capital to this account.
   • Obtain Encashment Certificate: Get an Encashment Certificate from the bank to confirm the purpose of the remittance. A foreign shareholder is required to remit their share subscription funds to a temporary bank account opened in the name of the proposed company during the incorporation process. Once the required paid-up capital has been deposited into this account, the bank will issue an encashment certificate, which must then be submitted to the Registrar of Joint Stock Companies and Firms (RJSC) for the issuance of shares to foreign investors in Bangladesh.

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Step 4: Inward Equity Remittance:

1. • Transfer Funds: Shareholders must transfer the initial capital via SWIFT, specifying “Equity Investment” as the purpose.
   • Bank Processing: The bank will process the remittance and issue an Encashment Certificate.

Step 5: Filing to RJSC Web-portal Online:

1. • Upload Documents: Submit MOA, AOA, Form IX, Form VI, and the Encashment Certificate online.
   • Complete Registration: The RJSC will review and approve the registration application.

Step 7: Company Registration Documents:

1. • Receive Incorporation Certificate: Obtain the Incorporation Certificate, certified copies of MOA and AOA, and Form-XII (Particulars of Directors).

Step 8: Other Registrations and Licences:

1. • Apply for Licences: Obtain trade licences, Tax Registration (E-TIN), VAT registration (BIN), and memberships from relevant Chambers of Commerce.
   • Import/Export Registration: Secure necessary certificates for import or export activities if applicable

Step 8: Activating the Final Bank Account:

1. • Obtain TIN Certificate and Trade License: Submit all the required licensing documents with the bank along with the bank account activating board resolution
   • Import/Export Registration: Upon the bank’s acceptance of all requisite documents and completion of their Know Your Customer (KYC) procedures, the bank shall activate the temporary bank account. Consequently, the company will be fully prepared and authorized to commence operations.

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