One Person Company (OPC) in Bangladesh: Comprehensive Insights

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Introduction

An incorporated company in Bangladesh is recognized as a separate legal entity, distinct from its shareholders or members. Traditionally, companies were classified into public companies, requiring a minimum of seven persons, and private companies, requiring at least two persons. This structure posed significant challenges for individual entrepreneurs who had no option but to resort to sole proprietorship, which entailed numerous risks and business limitations.

The amendment to the Companies Act in 2020 introduced the concept of the One Person Company (OPC), allowing a single individual to register a company with the benefit of limited liability. This initiative aims to encourage entrepreneurship, particularly among small and medium enterprises, by providing a corporate structure with simplified legal compliance requirements. This article delves into the opportunities and challenges associated with registering an OPC in Bangladesh.

Requirements for Registering an OPC

  • Natural Person Requirement: Only natural persons can be shareholders of an OPC, excluding legal entities such as corporations.
  • Single OPC Formation: An individual cannot form more than one OPC to ensure focused attention on the growth of the OPC.
  • Non-Citizen Challenges: Although the law does not prohibit non-citizens from establishing an OPC, they face practical issues due to the requirement of a National Identification Card Number (NID) followed by obtaining Tax Identification Number
  • Foreigners’ Difficulty: Foreigners, who do not have NID numbers, encounter challenges in meeting this requirement.
  • Share Transfer Provision: Provisions exist for the transfer of shares to foreigners.
  • RJSC Recommendation: The Registrar of Joint Stock Companies (RJSC) is urged to accept passport numbers for foreigners to encourage foreign direct investment.

Nominees

A natural person can be nominated as a nominee with written consent. The nominee will become the shareholder if the sole shareholder dies or becomes incapable of managing the company. The nominee’s name must be registered at the time of the OPC’s incorporation. The nominee has the right to withdraw their name, and the shareholder can change the nominee by notifying the Registrar. The nominee is entitled to the same dividends and benefits as the original shareholder, accompanied by corresponding liabilities.

While a person is restricted from forming multiple OPCs, they can be nominated for numerous OPCs and may become a shareholder of multiple companies upon the death of the sole shareholders.

Naming of the OPC

OPCs must use ‘OPC’ after their name, similar to the ‘LTD’ used by private and public limited companies. Exceptions for non-profit associations and companies limited by guarantee remain applicable. However, some people find it less convincing being limited company to add OPC in the name of the company.

Capital Requirements

The OPC must have a paid-up share capital between 2.5 million and 50 million taka. This requirement has faced criticism for being too high for typical small and medium enterprises. Comparatively, India’s capital requirement for OPCs is significantly lower. The Bangladeshi government is encouraged to reconsider and lower the capital requirement to make it more accessible.

Additionally, the OPC’s annual turnover must be between 10 million and 50 million taka for the preceding financial year. Exceeding these limits may necessitate the OPC’s conversion into a private or public company, though this is not mandatory, unlike in Indian law.

Registering an OPC

The Memorandum of Association (MoA) must include the name and consent of a nominee. The registration process follows similar procedures to those for private limited companies, including obtaining name clearance, providing identification documents, and submitting the necessary forms. Foreigners must provide their passports instead of NID numbers. Upon registration, the RJSC issues a certificate of incorporation, allowing the OPC to commence business.

Directors and Meetings

The sole shareholder of an OPC acts as its director, but the law does not limit the number of directors. The Corporate Governance Code mandates effective representation of independent directors on company boards. OPCs must hold at least one director’s meeting every six months. The law should provide clearer guidelines on meeting procedures and quorum requirements.

Share Transfer

The sole shareholder can transfer their entire share in the OPC to another natural person, including foreigners. The transfer cannot be done in parts.

Compliance

The government has reduced the OPC tax rate to 25% from the previous 32.5% for the 2023-24 financial year, encouraging investment in business ventures by reducing associated costs. OPCs must submit their financial statements to the Registrar within 180 days of the financial year’s end, signed by the sole shareholder-director.

Conclusion

The OPC structure in Bangladesh offers a significant boost to entrepreneurship, despite challenges such as high capital requirements. Less than 100 OPCs were registered in the first year of the legal enactment, highlighting these challenges. As OPC practices develop, the legal framework will need adjustments to address the grey areas and ensure the structure’s success.

How LegalSeba.com Can Assist in Forming One Person Company in Bangladesh

LegalSeba.com provides expert guidance and services to facilitate the formation of an OPC in Bangladesh. Our comprehensive services include:

  1. Consultation and Eligibility Assessment: We provide detailed consultations to determine eligibility and guide clients through the initial steps of forming an OPC.
  2. Documentation and Registration: Our team assists in preparing and filing all necessary documents, including the Memorandum of Association (MoA), Articles of Association (AoA), and forms required by the RJSC.
  3. Name Clearance and Compliance: We help secure name clearance from the RJSC and ensure all compliance requirements are met, including identification documents and tax identification numbers.
  4. Nominee Arrangements: LegalSeba.com facilitates the nomination process, ensuring that all legal formalities are adhered to.
  5. Capital and Financial Guidance: Our experts provide advice on meeting capital requirements and managing financial documentation to comply with legal standards.
  6. Taxation and Legal Compliance: We offer ongoing support for tax filing and compliance with corporate governance regulations, ensuring the OPC operates within the legal framework.

LegalSeba.com is committed to making the process of forming and operating an OPC in Bangladesh seamless and efficient, allowing entrepreneurs to focus on growing their businesses. Contact us today for specialized assistance in establishing your One Person Company.