What is a Joint Venture in Bangladesh?

In sectors where restrictions on foreign investors’ equity participation exist, foreign investors may not conduct business in the form of Branch office as in those cases, the Joint Venture partners (Local and Foreign Investors) open up a Joint Venture Company and run the business as per the object clauses of Memorandum of Association maintaining the ratio fixed by the government in equity participation in a particular sector.

In Bangladesh 100% foreign investment is allowed unless the sector is fall within the scope of reserved sectors i.e. Arms and ammunition, Forest Plantation, Production of nuclear energy and Security printing. Another point should be noted that as per laws of Bangladesh foreign shareholders cannot hold more than 40% shares if the company intends to provide freight forwarding services. Freight forwarding license can be obtained by incorporating a JV Logistics Company only if the Company has a highest 40% foreign shareholding and 60% local shareholding. One or more foreign investors can set up a Joint Venture Company in Bangladesh with collaborating of one or more Bangladeshi investors.

How to Incorporate a Joint Venture in Bangladesh?

The procedures for incorporating a Joint Venture (JV) in Bangladesh are similar to incorporate a general Private Limited Company.

(1) Outline | Incorporation of Joint Venture 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 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.   

(2) Procedure | Incorporation of Joint Venture in Bangladesh

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

STEP 1: OBTAIN NAME CLEARANCE LETTER

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

a)     Application Form;

b)    Proposed Name. 

STEP 2: DOCUMENTATION

a)     Drafting of MoA and AoA and other necessary documents,

b)    Promoters' resolution to open a Company in Bangladesh;

c)     Obtaining and executing the following forms for registering the Company with RJSC:

·      Filled in Form I: Declaration on registration of Company;

·      Filled in Form VI: Notice of situation of registered office;

·      Filled in Form IX: Consent of director to act;

·      Filled in Form X: List of persons consenting to be directors;

·      Filled in Form XII: Particulars of the directors, manager and managing agents. 

STEP 3: FORMALITIES RELATED WITH BANK ACCOUNT  | Incorporation of Joing Venture in Bangladesh

a.     Promoters 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;

b.     Capital contribution into the bank account.

c.     Encashment certificate from the bank which states that the amount required for capital contribution has been duly remitted in the temporary bank account of the proposed company. 

STEP 4: SUBMISSION OF DOCUMENTS TO RJSC

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

Time Frame: Once the aforementioned formalities are complied with, RJSC generally provides with the certificate of incorporation (Company registration certificate) within 6-8 working days.

Post registration compliances for a Private Company limited by shares

(a) Trade License

The Companies have to obtain trade license from the relevant City Corporation[1]. The proposed Company is required to file its application at the nearest City Corporation along with relevant documents and appropriate fees. 

(b) Tax Identification Number (“TIN”)

A Company has to obtain TIN from National Board of Revenue (NBR) which is the relevant authority in this regard.

(c) VAT Registration Certificate

A VAT registration certificate also has to be obtained by the newly incorporated Company. In this regard, the application has to be made to the NBR.

(d) Fire Certificate

Fire certificate is provided by the Bangladesh Fire Service and Civil Defense Authority.

(e) Environment Clearance Certificate

A Company, if involved in industrial project, has to obtain an environment clearance certificate from the Department of Environment by filling up the prescribed form.

(3) 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.

However, a JV agreement is required to complete such incorporation. A JV agreement can be executed by the mutual understanding between the parties. The JV agreement needs to be affixed with the relevant stamp duties so that it carries more value/credibility in the eyes of laws. If the JV agreement is executed in Bangladesh by both the parties then the JV agreement shall be printed on non-judicial stamp paper at first and then signed by both the parties. If the foreign counterpart executes the JV agreement from outside Bangladesh then JV agreement needs to be duly consularized and attested by the concerned Bangladeshi Embassy and foreign ministry in Bangladesh and then affixed with the stamp duty.

How much time is required for incorporation?

Once the aforementioned formalities are complied with, RJSC generally provides with the certificate of incorporation (Company registration certificate) within 6-8 working days. It usually takes 2-3 weeks to register a Company from the date of submitting all the documents to RJSC.

Once the name clearance is obtained, the clearance remains valid for 6 months. Generally 3 working days are required to obtain a name clearance. After obtaining the Name Clearance certificate a bank account need to be opened where the initial paid up capital need to be transferred from the shareholders’ account. If there is any foreign investment then the amount for paid up capital need to be remitted through the newly opened bank account following proper procedure.

Fees are required for incorporation of Joint Venture in Bangladesh?

The governmental fees of the Company registration depend on the amount of Authorised Capital. For issuance of Incorporation Certificate governmental fees shall be BDT 1000.