A Complete Guideline for the Formation of a Private Limited Company in Bangladesh

Most Bangladeshi companies are registered as private limited liability companies, commonly known as private limited companies. A private limited company in Bangladesh is a separate legal entity and shareholders are not liable for the company’s debts beyond the amount of share capital they have contributed. According to the Companies Act 1994, any person (foreign or local) above the age of 18 can register a company in Bangladesh.

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

The Companies Act 1994 outlines the characteristics of a company in Bangladesh:
a. It restricts the rights to transfer the shares [s. 2(k)];
b. The minimum number of members is 2 (two) [s. 5];
c. The maximum number of the members is 50 (fifty) excluding the persons employed in the Company [s. 2(k)];
d. It must have at least two directors [s. 90 (2)];
e. It prohibits any invitation to the public to subscribe for the shares or debentures of the Company [s. 2(k)];
f. It does not have to fulfill the requirement of statutory meeting or statutory report [s.83 (12)].

 

Pre-Registration: Key Facts:

 

1. 1. Company Name: The name must be approved (cleared) before incorporation of a company in Bangladesh.
   2. Directors: A private limited company must have at least two (2) directors, who can be either local or foreign nationals. Directors must be at least eighteen (18) years old and cannot be bankrupt or have a criminal record. According to the law, a director must hold the qualification shares specified in the Articles of Association. If a shareholder is a legal entity, such as a company, it can appoint a nominee director to represent it. Furthermore, the ultimate control and management of the affairs of the company vests in the Directors.
   3. Shareholders: A private limited company in Bangladesh is required to have at least two (2) and no more than fifty (50) shareholders. A director can also be a shareholder, or these roles can be held by different individuals. The Shareholder can be a person or another legal entity such as another company or trust. 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.
   4. Authorized Capital: The authorized capital amount must be specified in the Memorandum of Association and Articles of Association. This represents the maximum share capital the company is permitted to issue to shareholders, and a portion of it can remain unissued. In Bangladesh, there is no set minimum or maximum limit for authorized capital for a local company. However, to ensure full flexibility for expatriation and hiring foreign expatriates, it is practical to invest a minimum of USD 50,000 in the company. The Articles of Association of the company may authorise the company to increase the paid-up capital of the company.
   5. Paid-Up Capital: The minimum paid-up capital for registering a Bangladeshi company is Taka 1 for local companies and USD 50,000 for foreign-owned companies. Paid-up capital, also referred to as share capital, can be increased at any time after the company has been incorporated.
   6. Registered Address: In order to register a company in Bangladesh, a local address has to be provided as the registered address of the company. The registered address must be a physical address. By having a registered address, all communications and notices may be addressed to the registered address.
   7. Memorandum and Articles of Association: The Company to be incorporated must have its own Memorandum of Association and Articles of Association.

 

 

Documents required for Company Registration in Bangladesh:

For the purpose of company incorporation in Bangladesh, the following information is required by the RJSC:

• Company Name: A name clearance must be obtained.
• Memorandum of Association and Articles of Association: RJSC requires that the company should draft a solid and consolidated constitution document of the company.
• Shareholders Particulars: Copy of the National Passport is required if the shareholder is a Bangladeshi citizen.
• Particulars of the Directors, including the Tax Identification Numbers are required.
• Registered Address.
• Signed Form IX and Subscriber Page: Signed and scanned copy in pdf are required.
• For foreigners: Copies of passports of shareholders and directors are required.

 

Registration process for Incorporating a Company in Bangladesh:

The following detailed steps outline the procedure for incorporating a Private Limited Company in Bangladesh:

 

1. 1. The regulatory authority: Registrar of Joint Stock Companies and Firms (RJSC):
      A company is registered under the Companies Act 1994. The Regulatory body for incorporating a company is the Registrar of Joint Stock Companies and Firms (RJSC) which facilitates formation of companies and firms. The body is also responsible for keeping track of all ownership related issues as prescribed by the laws in Bangladesh. Promoters should keep in mind that except for some very exceptional cases, Bangladesh allows the incorporation of a company with 100% foreign shareholding, and no local joint venture is required.

 

 

2. 2. Obtaining Name Clearance:
      To set up a Bangladesh company, the first step would be to obtain a name clearance for the proposed company name. One has to visit www.roc.gov.bd and create a username first and then apply for the name clearance. After the application for name clearance is made, a bank payment slip will be received, with which Tk. 600 will have to be submitted to the designated bank. After making the payment, the name clearance can be obtained from the RJSC website.

 

 

3. 3. Drafting the Memorandum of Association 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 that they wish to form a Company, the primary business objectives, the amount of paid-up capital and authorized capital, and state the list of the shareholders along with their respective shareholdings. It is to be noted here that a minimum of two (2) shareholders are required to set up a Private Limited Company. The memorandum must be in the prescribed form and must be authenticated by each subscriber.
      The Articles of Association of the Company should include the list and number of the directors, power of the board, power of the Managing Director, meeting process, quorum, notice procedure, appointment of auditors etc.
      Directors are required to hold a 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.

 

 

4. 4. Opening Temporary Bank:
      Once name clearance is obtained, a temporary bank account is required to be opened by the proposed company. Along with the name clearance documents, a copy of the Draft Memorandum and Articles of Association needs to be submitted to the respective banks. Bank accounts can be opened remotely.

 

 

5. 5. Remitting Money to the Bank Account:
      This step is only applicable if the proposed company has foreign shareholding. This requirement is not applicable if all shareholders are Bangladeshi nationals.
      The Foreign Investors are required to remit the desired paid-up capital in the bank account of the company. The Bank will hold the remitted amount. It should be noted that for legal purposes, there is no minimum capital requirements for setting up a company; however, in order to obtain certain advantages including appointing foreign employees, the minimum requirement is USD 100,000. Upon remittance of the paid-up capital, an Encashment Certificate needs to be obtained from the respective bank.

 

 

6. 6. Submission of Digital Documents:
      Upon receipt of the encashment certificate, the foreign promoters are required to upload a digital copy of the Memorandum and Articles of Association, Directors Consent Forms to the RJSC server. On submission of the documents in the RJSC server, an Electronic Payment Slip will be printed and equivalent amounts need to be submitted to designated bank accounts of RJSC.

 

 

7. 7. Submission of Physical Documents:
      Upon payment of fees to the designated bank account for governmental fees and charges as stipulated in the Electronic Payment Slip, a non-judicial stamp needs to be affixed in the Memorandum and Articles of Association and the same need to be submitted to RJSC along with Directors Consent Form (Form IX), List of Consenting Directors (Form X), List of Directors and Managing Agents (Form XII); Original copy of the Encashment Certificate and Name Clearance Document and payment slip acknowledged by the Bank.

 

 

8. 8. Registration of the Company:
      The last step is to submit all the required information in the RJSC’s website. After submission, a bank payment slip will be received for paying the registration fees along with stamp duty.
      After making the payment in the bank, the application for registration process is completed. Regular follow up of RJSC has to be carried out in order to obtain the Certificate of Incorporation. RJSC officials will check the documents and information. If they are satisfied, they will issue the Certificate of Incorporation.

 

 

Post-Registration Formalities:

The following documents are issued after the registration formalities are over:

• Certificate of Incorporation: RJSC will issue a Certificate of Incorporation of the company. The certificate will have the registration number, name of the company and the date of incorporation.
• Form XII: Form XII contains the list of directors of the incorporated company.
• Certified copies of Memorandum of Association and Articles of Association.

 

Applying for Trade Licence, Tax Identification Number (TIN), VAT registration and other licences:

 

1. 1. Obtaining a Trade License: Companies have to obtain a trade license from the local governmental authorities in Bangladesh. For example, in the case of Dhaka, a trade license has to be obtained from the respective City Corporation. A trade licence is issued for a year and must be renewed every year. The typical time frame is three-four (3-4) working days. Online application forms are available on local government websites.
      Useful link:
      http://www.etradelicense.gov.bd/
   2. Obtaining a Tax Identification Number (TIN): TIN is a unique identification number issued by the National Board of Revenue (NBR) of Bangladesh to identify taxpayers. All individuals and businesses that conduct economic activities in Bangladesh are required to obtain a TIN number. In order to start business operations, a private limited company must register for taxes at the appropriate taxation authority (Deputy Commission of Taxes of Company Circle, Zonal Taxation Department) under the NBR and obtain a TIN. This is a legal document that grants permission to an individual or a company to conduct business activities in a specific locality. Obtaining a TIN certificate is free of cost and it is done electronically through the NBR server.
   3. Obtaining VAT Registration Certificate: The Value Added Tax (VAT) registration certificate in Bangladesh allows a business to charge VAT on sales. Businesses with an annual turnover exceeding BDT 8 million must register for VAT with the National Board of Revenue (NBR). This certificate is also necessary for importing goods. Establishing a registered office, which serves as the company’s official address for communication and legal purposes, is crucial when registering a company in Bangladesh. VAT registration is free and the process does not require attachment of documents. The registration form is called VAT 2.1 or Mushak 2.1, which can be downloaded from the website of the NBR. The registration process typically takes about five- seven (5-7) working days.
      Useful link:
      o http://nbr.gov.bd/faq/vat-faq/eng
      o https://www.vat.gov.bd/
      o http://nbr.gov.bd/form/vat/vat-2012
   4. Fire Licence (if required): Fire licence is another obligatory permit required by all factories, according to the Fire Prevention and Fire Fighting Act, 2003. The permit is issued by the Department of Fire Service & Civil Defense (FSCD), under the Ministry of Home Affairs. A fire license must be renewed every year. Estimated processing time for getting a fire license is usually ninety- one twenty 90-120 working days. It certifies that a building or structure meets fire safety standards. In Bangladesh, businesses should obtain a fire certificate to ensure that their premises are safe and free from fire hazards.
      Useful link:
      http://efirelicense.gov.bd/
   5. Environmental Clearance Certificate (if required): A Private Limited Company intending to start a new project in Bangladesh or expand an already-existing one is required to obtain an environment license; this is especially the case if the scheme involves the use or manufacturing of hazardous materials or processes that have the potential to cause environmental harm. The licence stipulates regulations and requirements that the business is obligated to in order to ensure that its operations are environmentally friendly and respectful to the environment. The Certificate must be obtained from the Department of Environment (DOE).
      Useful link:
      Application form: https://ecc.doe.gov.bd/
   6. Registration with any Chamber of Commerce and Industry (optional but mandatory for obtaining either Import Registration Certificate – IRC or Export Registration Certificate – ERC)
   7. Export Registration Certificate (ERC)/Export License (if required): An export license or ERC is a document that permits a business to export goods from Bangladesh in relation to commercial purpose or for industrial raw materials. In Bangladesh, certain goods require an export license from the relevant government agencies. The export license is necessary for various reasons, including to ensure the quality of the exported goods, to control the quantity of exported goods, and complying with international trade regulations. In Bangladesh, the Office of the Chief Controller of Imports and Exports (CCI&E) which is an individual organization under the Ministry of Commerce which issues this Export licence where an application has to be made in prescribed form.
      Useful link:
      o https://olm.ccie.gov.bd/
      o www.ccie.gov.bd
   8. Import Registration Certificate/Import License (if required): An import license or Import Registration Certificate (IRC) is a document that permits a business to import goods into Bangladesh. In Bangladesh, certain goods require an import license from the relevant government agencies. The import license is necessary for various reasons, including ensuring the quality of the imported goods, controlling the quantity of imported goods, and preventing the import of prohibited goods. In Bangladesh, the Office of the Chief Controller of Imports and Exports (CCI&E) which is an individual organization under the Ministry of Commerce which issues this Import licence where an application has to be made in prescribed form.
      Useful link:
      o https://olm.ccie.gov.bd/
      o www.ccie.gov.bd
   9. Registering with Bangladesh Investment Development Authority (BIDA): Bangladesh Investment Development Authority (BIDA) is responsible to facilitate foreign investments in Bangladesh. BIDA’s responsibilities include issuing work permits for foreign employees, visa for foreign investors, processing loans from foreign sources, approval of remittance of royalties and technical fees, assisting in obtaining industrial plots, facilitating utility connections, approval of the foreign loan, suppliers’ credit, and assisting and advising on many investment-related issues. Foreign Investors with Industrial Projects are strongly advised to register with BIDA upon the incorporation of their private limited company. However, for Commercial or trading Companies, there is no requirement for registration with BIDA. The typical time frame for obtaining registration is about thirty (30) working days.
      There are three types of investment registration:
      1. Local investment
      2. Foreign investment
      3. Joint-venture between foreign and local investors

 

 

Reference:

 

1. 1. “The Companies Act” (Act No. 18 of 1994), Md. Alam Shah, Advocate, Supreme Court of Bangladesh, (January 2023).
   2. https://bida.gov.bd/themes/bida/assets/pdf/Bangladesh-Investment-Handbook-by-BIDA.pdf
   3. Guide to the Companies Act – A Ramaiya; Fourteenth Edition, 1998 (With SEBI Guidelines Rules and Regulations & Accounting and Auditing Practices) – Justice Y V Chandrachud; Former Chief Justice, Supreme Court of India, Dr. S M Dugar; Alongwith Collaborating and Specialist Editor.
   4. Palmer’s Company Law (Annotated Guide to the Companies Act 2006).
   5. Guide to Company Law Procedures (Procedures, Rules, Compliances and Governance under the Companies Act, 2013; M C Bhandari; 23rd Edition; Volume 1.
   6. Guide to Company Law Procedures (Procedures, Rules, Compliances and Governance under the Companies Act, 2013; M C Bhandari; 23rd Edition; Volume 2.
   7. Guide to Company Law Procedures (Procedures, Rules, Compliances and Governance under the Companies Act, 2013; M C Bhandari; 23rd Edition; Volume 3.
   8. Guide to Company Law Procedures (Procedures, Rules, Compliances and Governance under the Companies Act, 2013; M C Bhandari; 23rd Edition; Volume 4.

 

 

 

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