Are you looking to expand to Bangladesh by partnering with another (local) company? In this article, we describe the process of setting up a joint venture in Bangladesh.
Why set up a joint venture?
Foreign ownership limitations
There are business classifications in Bangladesh where a joint venture with a local company is mandatory or strongly advised. Here are 17 controlled sectors that require prior approval from the government:
- Fishing in the deep sea
- Bank/financial institution in the private sector
- An insurance company in the private sector
- Generation, supply, and distribution of power in the private sector
- Exploration, extraction, and supply of other mineral resources
- Large-scale infrastructure project (e.g. a flyover, elevated expressway, monorail, economic zone, inland container depot/container freight station)
- Crude oil refinery (recycling/refining of lube oil used as fuel)
- Medium and large industry using natural gas/condescend and other minerals as raw material
- Telecommunication service (mobile/cellular and land phone)
- Satellite channel
- Exploration, extraction, and supply of coal
- Cargo/passenger aviation
- Sea-bound ship transport
- Sea-port/deep sea-port
- VOIP/IP telephone
- Industries using heavy minerals accumulated from sea beach
- Exploration, extraction, and supply of natural gas/oil
While foreign investment is allowed in all of these sectors, there are some industries in which the government recommends to form a joint venture:
- Crude oil refinery (recycling/refining of lube oil used as fuel)
- Generation, supply, and distribution of power in the private sector
- Medium and large industry using minerals as raw materials
Prohibited sectors in Bangladesh
There are also four prohibited sectors in which no foreign nor local investment is allowed:
- Military equipment and machinery
- Nuclear power
- Security printing/minting
- Forestation and mechanized extraction within the boundary of a reserved forest
Setting up a Joint Venture in Bangladesh
Incorporation of a legal entity
The company registration process in Bangladesh consists of several steps, from the preparation of all the required documents until submission to the Register of Joint Stock Companies and Firms (RJSC).
The average estimated timeline of company registration in Bangladesh is 45-60 days.
Minimum capital requirement
During the incorporation, you also need to open a bank account in the name of the company and inject the paid up capital.
In Bangladesh, there is no official minimum capital requirement for any company. However, take note that investors need to make an inward remittance of USD 50,000 to cover six months of operating expenses of the company.
How to register a joint venture in Bangladesh
When registering a joint venture company in Bangladesh, your first step is to submit your company’s Memorandum of Association and Articles of Association to the RJSC. Also, have the scanned pages of the subscribers’ details and the signed Form IX prepared, as you will need to submit them too.
The third and the most important step during the registration of a joint venture is to prepare a Joint Venture Agreement and submit it to the RJSC.
Also, keep in mind that this agreement is an essential document in which you need to set the conditions and rights for both parties. Emerhub can assist you on this matter.
Lastly, you need to pay registration fees to the bank for the proposed company and submit an encashment certificate for the proposed company to RJSC.
Post-registration tasks
Depending on the type of your newly registered joint venture, there are some additional licenses and procedures you need to follow:
- Collect Trade License
- Obtain Taxpayer’s Identification Number (TIN) Certificate
- Regularize Bank Account for the newly registered Joint Venture Company
- Obtain VAT Certificate
- Import Registration Certificate (In case of Import Business)
- Export Registration Certificate (In case of Export Business)
How to protect yourself when entering into a joint venture?
Conduct thorough due diligence
When venturing into emerging markets, it is vital to know what are the possible risks you can encounter before you set foot and do business. Moreover, before entering into agreements or partnerships with new associates, it is essential to do your homework beforehand.
Due diligence is crucial as it allows you to look ahead of all the risks for you to decide whether to go or not.
Emerhub can conduct due diligence for you, below are some of the main due diligence activities that we offer:
- Determine the business classification of the company
- Determine whether the company has acquired all the relevant licenses
- See if the company has reported tax and investment correctly
- Determine the number of employees
- Determine the registered address
Proper Cooperation Agreement
Signing a joint venture agreement enables both parties to keep track of all the arrangements they agreed before the start of the venture. The cooperation contract will regulate different aspects of the enterprise, such as:
- Purpose and structure
- Equity, capital, and future financing
- Warranties and exit provisions
- Etc.
Also, as the joint venture agreement will secure the interests of both parties, it is essential to have a corporate lawyer draft the cooperation contract. Emerhub can help you with this document.
If you need help on setting up a Joint Venture in Bangladesh, fill up the form below to discuss how we can help you do business in Bangladesh.
