Company Incorporation

Company Formation in Bangaldesh

Company Formation in Bangladesh

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Although there are many other options to start a business in Bangladesh, out of which the most common and useful modes are either registering a branch office (for foreign entities only) or incorporating a private limited company for the domestic entrepreneurs as well as the foreign entities.  The procedure of registering a private limited company has been mentioned down below.

What is a Private Limited Company?

As per section 2(q) of Companies Act 1994, A Private Company is a Company which by its Articles of Association restricts the right of transfer of the share, limits the number of members to fifty and prohibits invitation to the public to subscribe to the shares or debentures of the Company.

 

The Companies Act 1994 has mentioned the following characteristics of a Private Limited Company:

  1. It restricts the rights to transfer the shares [s. 2(q)];
  2. The minimum number of members is 2 (two) [s. 5];
  3. The maximum number of the members is 50 (fifty) excluding the persons employed in the Company [s. 2(q)];
  4. It must have at least two directors [s. 90 (2)];
  5. It prohibits any invitation to the public to subscribe for the shares or debentures of the Company [s. 2(q)];
  6. It does not have to fulfill the requirement of statutory meeting or statutory report [s.83(12)].
  7. Subject to obtaining other licenses mentioned below in the post-registration section of this Report, a Private Company can commence business as soon as it is registered with the RJSC.

 

How to Incorporate a private limited company in Bangladesh?

Outline | Incorporation of a Private Limited Company in Bangladesh

The Companies Act 1994 does not provide the step by step procedure on how to set up a Company rather deals with the statutory requirements of Company incorporation. It is dealt with by the RJSC, the appropriate body; which provides the detailed guideline on its official website regarding the procedure of setting up a Company from name clearance to incorporation.

 

Procedure | Incorporation of a Private Limited Company in Bangladesh 

The steps for the registration of a Private Company limited by shares in Bangladesh are detailed below:-

 

STEP 1: OBTAIN NAME CLEARANCE LETTERIncorporation of a Private Limited Company in Bangladesh

Application for name clearance to RJSC along with the following information:

  1. Application Form;
  2. Proposed Name.

 

STEP 2: DOCUMENTATIONIncorporation of a Private Limited Company in Bangladesh

  1. Drafting of Memorandum of Articles and Articles of Association and other required documents,
  2. Directors’ resolution to open a new Company in Bangladesh;
  3. Obtaining and filling up the following forms for registration of the Company to RJSC:
  4. Form I: Declaration on registration of Company;
  5. Form VI: Notice of situation of registered office;
  6. Form IX: Consent of director to act;
  7. Form X: List of persons consenting to be directors;
  8. Form XII: Particulars of the directors, manager and managing agents.

 

STEP 3: FORMALITIES RELATED WITH BANK ACCOUNT Incorporation of a Private Limited Company in Bangladesh

  1. Directors 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 regularized once the Company is duly registered with Company House;
  2. Capital contribution to the bank account.
  3. Encashment certificate from the bank which expresses that the sum required for capital contribution has been duly dispatched in the temporary bank account of the proposed organization.

 

STEP 4: SUBMISSION OF DOCUMENTS TO RJSCIncorporation of a Private Limited Company in Bangladesh

Application to RJSC along with the documents executed as listed above.

 

Special Case (Investment in kind, etc.)

The concept of ‘investment in kind’ is not detailed under Companies Act 1994. However, in practice, significant investment is made by investing in machineries and other equipment in a Company by a shareholder or a proposed shareholder in a Company incorporated in Bangladesh. Although CA 1994 does not govern the procedure, the following steps are followed while carrying out such investment in kind:

  • The concerned company has to be duly registered with RJSC,
  • The concerned investors have to fill up the relevant Form(s),
  • The concerned investors are required to have a vendors’ agreement between them,
  • The filled up Form(s) and the vendors’ agreement have to be filed with RJSC.
  • The RJSC will then record the investment and monitor whether the proper procedure has been duly followed.

Taxation for Companies

A company needs to pay corporate tax on its profit (Revenue-Expenses); if it doesn’t have the profit, it doesn’t need to pay tax. This is subjected to the followings:

i. File income tax return annually (usually on 15th January of next year following financial closing, usually (July-June)

ii. Make sure to inject paid-up capital to the company’s bank account by cheques.

iii. Make sure the debit-credit in the bank statements are adequately explained

iv. Minimum tax usually @.06% of gross revenue to be paid.

Corporate Tax Rate in Bangladesh:

Publicly traded companies (listed companies on stock market) 25%
Non-publicly traded companies (private companies limited by shares) 32.5%
Publicly traded banks, insurance, and financial institutions other than merchant banks 37.5%
Non-publicly traded bank, insurance, and financial institutions 40%
Publicly Traded mobile network operators 40%
Non-publicly Traded mobile network operators 45%
Publicly Traded cigarette manufacturers 45%
Non-publicly Traded cigarette manufacturers 45%

 

Besides, there are several tax exemption facilities for companies based on the nature of business & location.

Still, have a question? Let’s answer them all 😊

Are there any minimum shareholders required to form a company?

For a private limited company, the minimum requirement is two shareholders.

Are there any minimum Directors required to form a company?

For a private limited company, the minimum requirement is to have two directors.

Is there any requirement of resident / local director to operate a foreign company in Bangladesh??

Generally, there is no requirement of resident/local director.

Is there any minimum amount for the authorize and paid-up capital to be prescribed?

As to limitation on capital amount; there is no limit on authorized or paid-up capital amount. However, it is suggested to have, at least, the authorized capital of BDT equivalent to USD 50000 for other legal purposes. & paid-up capital as required to operate your business as you think proper for the foreign entities.

Are there any guidelines as to whether activities of company need to be reflected in the name?

There are no such guidelines; however, in practice, it is suggested.

Please note that, if the Company House finds the name (for which application for name clearance has been filed) similar to the name of any other existing company then the Company House shall suggest proceeding with different name.

Is it mandatory to have a registered local address for the company?

Yes, it is mandatory to have a registered address for the company.

Do you provide office address?

Yes, we provide office address on a yearly basis.

Company formation checklist (Required documents)
  • 3 proposed names for the proposed company
  • Signed documents (MOA AOA, and others)
  • Particulars of the shareholders and directors (i.e. addresses, passport copies, email address, contact number, national identity, e-TIN, and others information)
  • Encashment Certificates (upon remitting the capital amount to the temporary bank account in Bangladesh the concerned bank shall issue the Encashment Certificate). It is only required for the foreign nationals & entities.

[In this regard, please note that temporary bank account opening may take very long time depending on the bank you are intending to subscribe with. Therefore, it is suggested to start the processing right after obtaining the name clearance.]

  • Any other things if asked by the Company House
Whether prior permission of regulatory authority is needed for making investment - say Board of Investment?

No; there are no such prior requirements.

Timing for remitting minimum subscription to capital (paid-up capital)- before or after company formation?

Foreign entities or persons need to send the entire amount of his/her paid-up capital to a local bank account or temporary bank account of the company right after the name clearance. The encashment certificate is required to get a company incorporation approval from Company House.

This process is not required for the local share subscribers.

Whether Director need to obtain any registration before becoming director of the company?

No.

Is this mandatory to appoint a company secretary?

For a private limited company, it is not mandatory to appoint the secretary.

What is the timeline for company formation?

Step 1: 1-2 working days to get name clearance

Step 2: 3-7 working days from filing the application.

Step 3: To get the certificate of incorporation, 1-2 weeks from filing the complete application provided all the documents are ready

What are the post company formation required licenses and approvals?

In order to operate the business, the company needs to obtain relevant permits, licenses, approvals, and clearances from different governmental authorities. These permits, licenses, approvals, and clearances shall depend on the nature of business and industry like environment clearance, factory permission, fire certificate etc.

Most common licenses is Trade License, The Trade License needs to be obtained from relevant city corporation or union parishad.

TIN (Tax Identification Number) Certificate,and VAT (Value Added Tax) Registration Certificate. For the TIN and VAT Registration, the concerned authority is the relevant department under the National Board of Revenue (NBR).

When will be a company be fully ready to operate legally in Bangladesh complying all the procedure?

Once a company gets:

  1. Company Incorporation Certificate
  2. Trade License
  3. TIN Certificate
  4. VAT Registration Number
  5. Finally, the Bank Account
  6. Any membership/license approval with the concerned business sector (if required)

The company shall be completely ready to operate in Bangladesh.

Are there any restriction/strict guidelines to follow in case of alteration in company operation & management in future?

Yes, a certain procedure shall have to follow in case of the following issues:

  1. Election and removal of directors
  2. Appointment of auditors
  3. Investment in associated entities
  4. Increase in share capital
  5. Dividend declaration, etc.
What are the changes or updates a company need to submit with the Company House?
  1. Annual Return

Each year, an Annual General Meeting must be held. The meeting must be conducted within 18 months of company.

  1. Regular Corporate Filling:

In case of any specification change in the shareholding structure or board of directors or any other change, a relevant return must be filed with the RJSC (Company House) within a certain period of time.

Show me the minimum share capital chart for company and other business entities.
Type of Entity Maximum allowed foreign ownership Minimum paid-up capital Minimum no. of shareholders
Private Limited Company 100% $1* 2
Public Limited Company 100% $1* 7
Subsidiary Company 51% -100% $1* 2
Branch Office 100% No capital* No shareholders
Representative Office 100% No capital* No shareholders
What is the difference between authorize capital & paid-up capital?

Authorize capital refers to the amount that a company is authorized to raise from its present and future shareholders. Paid up capital denotes the amount that the shareholder are going to invest or has already invested in the company.

Example: The authorize capital of XYZ Limited is 1 core divided by 1 lac shares with tk. 100 per share value. 3 shareholders started the company with the paid up capital 30 lac taka with equal share holding. Every shareholder owns 33.3% of the company holding 10,000 shares each. The company now wants to raise more from its shareholder. However, now they can raise up to 70 lac from the current shareholders or future shareholder since their authorize capital is tk. 1 crore. To raise more than 70 lac, the company needs to apply to the Company House to increase its authorize capital limit paying extra fees.

What are the documents required for bank account opening?
  • Updated Trade License
  • Certificate of Incorporation
  • AOA & MOA of the company
  • Board resolutions regarding bank opening on company letterhead pad
  • Picture & NID of those who will operate the bank account
  • Minimum Balance
  • TIN of the company
  • Seal in the name of the Managing Director, Chairman, Director
My company name is Sachi Technologies Ltd., can i have a website in the name of 'avana.com"?

A company is an entity & it can own several businesses in different names in compliance with the Memorandum of the company.

If it wishes to carry a different business that is not mentioned in the memorandum of the company, the company needs to apply with the High Court to add that category.

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