Private Limited Company 

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.

What are the characteristics of a Private Limited Company defined in Companies Act 1994?

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

a.     It restricts the rights to transfer the shares [s. 2(q)];

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(q)];

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(q)];

f.      It does not have to fulfill the requirement of statutory meeting or statutory report [s.83(12)].

g.     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 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 LETTER | Incorporation of a Private Limited Company in Bangladesh

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

a) Application Form;

b) Proposed Name.

STEP 2: DOCUMENTATION | Incorporation of a Private Limited Company in Bangladesh

a) Drafting of Memorandum of Articles and Articles of Association and other required documents, 

b) Directors' resolution to open a new Company in Bangladesh; 

c) Obtaining and filling up the following forms for registration of the Company to RJSC:

d)     Form I: Declaration on registration of Company;

e)     Form VI: Notice of situation of registered office;

f)      Form IX: Consent of director to act; 

g)     Form X: List of persons consenting to be directors;

h)     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

a. 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;

b. Capital contribution into the bank account. 

c. 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 RJSC | Incorporation of a Private Limited Company in Bangladesh

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

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. 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 E-TIN from the recommended website of National Board of Revenue (NBR). 

(c) VAT Registration Certificate

The newly incorporated Company has to collect a VAT registration certificate. In this regard, the application has to be made to the National Board of Revenue (NBR).

(d) Fire Certificate

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

(e) Environment Clearance Certificate

An environment clearance certificate from the Department of Environment has to be obtained by a company if it’s involved in an industrial project, by executing 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.

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 required for incorporation?

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.