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How to form a Joint Venture Company in Bangladesh

How to Form A Joint Venture Company in Bangladesh

Leading Law Firm in Dhaka, Bangladesh | FM Associates

 

This is a guide showing the step by step procedure as to how to form a joint venture company in Bangladesh, prepared by the lawyers of the leading Law Firm in Dhaka, Bangladesh. In the recent past Bangladesh has been a hotspot centre for the foreign investors due to the country’s rapidly growing economy and cheap labour prices, which is why the understand of the procedure as to how to incorporate a joint venture company in Bangladesh or procedure of forming a joint venture company in Bangladesh has gained alot of significance and importance. Many foreign investors are tying up with the local partners to form a joint venture company in Bangladesh and establish a limited liability company. These helps them to use the local resources more efficiently as their local partners are more familiar to the business mind set of the local market. 

What is a Joint Venture Company in Bangladesh

A joint venture company in Bangladesh is treated as separate legal entity and the formation procedure of a joint venture company in Bangladesh is similar to other countries. Firstly, before proceeding on to understand how to form a joint venture company in Bangladesh, it is important to grasp preliminary knowledge about company laws in regards to formation of a company in Bangladesh. Any two persons, above the age of 18, and/or entities (foreign or local) can register a company in Bangladesh. Shareholders are not liable for the company’s debts beyond the amount of share capital they have contributed. The entity is free to carry out its activities within the law and provide dividends to its shareholders. The joint venture company in Bangladesh has to comply with all required Tax and VAT implications and shall have to pay taxes on profits.

It usually takes three to four weeks to register a company from the date of submitting all the documents to Company House. The government fees to incorporate a company depend on the amount of Authorized Capital. If the company is looking to hire any foreign national, the company needs to show a minimum investment of USD 50,000. Furthermore, if foreign nationals are hired, the Company needs to ensure that the ratio between foreign and local employees is 1:5, however, the Company can apply for waiver of such condition, if required, with proper justification. A Company is most preferable form of establishment for investor who wished to provide services in Bangladesh for a long time basis. On the other hand, winding up a Company is more complex and time consuming matter comparing to a liaison/branch office. Usually it shall take 6-8 months to wind up a Company. The laws of Bangladesh guarantee non-discriminatory treatment between foreign and local investment, and repatriation of proceeds from sales of shares and profit.

Step by Step Procedure as to How to Register A Joint Venture Company in Bangladesh

Followings are the Step by Step Procedure in regards to forming a joint venture company in Bangladesh, the below procedure also stipulates the procedure in case of a foreign shareholder in Bangladesh.

Step 1 | Draft and Execute A Joint Venture Agreement

The formation of the joint venture company is initiated by entering into a joint venture agreement between the local and the foreign investor and obtaining a name clearance certificate from the Company House for the name which the investors prefers. The joint venture agreement determines the business scopes, the name of the company, shareholding ration, governing laws and jurisdictions, liabilities, board of directors and other important matters which the parties intends to be of crucial value. Once the terms and conditions of the agreement is agreed, the same is usually printed on BDT 300 non judicial stamp paper and subsequently signed by the parties/ their authorized representatives.

Step 2 | Obtain Name Clearance

You may chose the name of the company and see for yourself whether the same name is available in the name directory of RJSC (Registrar of Joint Stock Companies). After Signing up on the online name clearance portal, you can book a name and pay the fess through bank challan to the designated bank.

Step 3 | Draft the Memorandum of Association (MOA) and Articles of Association (AOA)

For the purpose of drafting a suitable MOA and AOA in compliance to the laws of Bangladesh and in alignment to the previously executed joint venture agreement in Bangladesh, it would be better if you could hire a lawyer or a law firm in Bangladesh to assist you. These documents needs to be legally compliant while reflecting the intentions of the parties on it in a comprehensive manner, therefore, hiring a law firm in Bangladesh could be viable option. 

Step 4 | Draft and Execute Form XII, IX

Drafting of the Form XII and Form IX shall be dependable on the structure given RJSC, information that reflects on the MOA and AOA shall be inserted in the form as per required.

Step 5 | Open the Proposed Company Bank Account (optional, only applicable in case of foreign partner)

Before, submitting the documents to the RJSC, the joint venture company is required to open up a temporary bank account, in any of the authorized bank of Bangladesh, in its name, by submitting the signed draft articles and memorandum of association, name clearance certificate, filled up bank form and other required documents. Once the temporary bank account is opened, the foreign investor is required to send the share capital amount from its foreign bank account to this temporary bank account. After, the share capital amount is received by the bank, it shall issue a encashment certificate which shall state that such share capital is transfers by the foreign investor. It is then required to submit the encashment certificate, along with the draft articles and memorandum of association, name clearance, the signed forms and the personal information of the shareholders and the directors to the RJSC. 

Step 6 | File the Documents to RJSC

After the submission, the RJSC shall verify the documents and provide the certified incorporation documents of the joint venture company.

FM Associates a a leading Law Firm in Bangladesh and Post Incorporation of Company in Bangladesh Related Services

After the incorporation of the company, it is the company is required to have the followings:

  1. Tax Identification Number (TIN) certificate
  2. VAT certificate from National board of Revenue
  3. Trade license from the relevant city corporation.

It usually takes 1 day to obtain t Tin certificate and seven to 14 days to obtain the VAT and trade license.

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