Due to no restrictions on commercial activity and the potential of making profits, setting up a subsidiary company in Bangladesh is a lucrative prospect for foreign investors. The subsidiary company is one of the favoured methods of market entry for foreign investors wishing to start a local firm in Bangladesh. However, understanding the procedure and necessary documents is crucial before setting up a subsidiary company in Bangladesh. Don’t worry! In this blog, we have discussed the process of registering a subsidiary company in Bangladesh.
What is a Subsidiary Company?
A private limited corporation that has a corporate entity as the majority of its shareholders is known as a subsidiary company. It can declare its profits and conduct relevant business operations in Bangladesh. A foreign company can own the subsidiary company in its entirety.
Characteristics of a Subsidiary Company
- A subsidiary company is an LLC (Limited Liability Company) that operates independently of its parent foreign corporation.
- A subsidiary firm receives the same treatment as a local corporation.
- If another business directly or indirectly controls, holds, owns, or manages more than 50% of a firm’s voting securities, the company is considered a subsidiary.
- If another firm controls the composition of a company’s board of directors, the company with the controlled board of directors is considered a subsidiary company.
- If any director of the subsidiary company is chosen or removed by the parent company without the approval of any other subsidiary company members, the structure of the board of directors is considered controlled.
- The local government grants it all tax breaks, exemptions, and allowances.
- The holding company's sole liability amount is the capital it invested in the stock.
- Due to its capacity for business operations, it bears the responsibility for its own debts and losses.
- It is able to hold real estate in its own name.
- A limited, private limited, or Ltd. should be the last character of the firm name.
- It has the legal capacity to sue or be sued.
Statutory Requirements For a Subsidiary Company
- The minimum number of directors is 2 and the highest number of directors is 50.
- The minimum number of shareholders is 2 and the highest number of shareholders is 50.
- BDT 1 is the minimum share capital that each shareholder must have.
- The shareholders could be business entities or real people.
- 100% foreign directors and foreign shareholdings are permitted.
- All of the company’s directors and members must be of sound mind and be older than eighteen.
- The subsidiary company must have a registered address in Bangladesh.
- The company must hire an auditor within 30 days of its corporation.
- Annual audited account submission, an annual general meeting, submission of all financial statements and board meetings, filing of tax returns, and filing of annual returns must be done according to annual compliance conditions.
Pros and Cons of a Subsidiary Company in Bangladesh
Pros | Cons |
There are no restrictions on commercial activity, therefore it is permissible to engage in any kind of business that is unrelated to the parent company. | Compared to the Liaison office or branch office, there are stricter guidelines and procedures. |
Beyond the capital they have invested in the business, shareholders are not responsible for any debts of the company. | Remitting equity investments back to the source is prohibited until the company dissolves. |
Even if the subsidiary company is a distinct legal company from the parent company, it is permitted to profit from the parent’s brand image in the market. | The dissolution procedure is drawn out, time-consuming, and somewhat expensive. |
The transfer of ownership through selling shares or issuing new shares to new investors is simple. | |
Because of its perpetual succession, the firm will not need to be wound up in the circumstance that its directors and shareholders change. |
Required Documents to Set Up a Subsidiary Company
Documents for a non-operating bank account in Bangladesh:
- Name Clearance certificate from RJSC (Register of Joint Stock Companies and Firms)
- Draft an MOA (Memorandum of Association) and AOA (Articles of Association) of the proposed subsidiary company in Bangladesh
- Promoters’ Meeting Minutes/ Board Resolution
- 3 copies of photographs of all shareholders and directors of the proposed company
- NID/ Passport copies of all shareholders (Real People)
- Signed and Completed Bank Account Application Form
Additional required documents for a corporate shareholder:
- The share tree analysis for a corporate shareholder
- Passports and Photographs of all shareholders of the parent company/ corporate shareholders
- Passports and Photographs of all nominee directors
- Incorporation certificate, MOA (Memorandum of Association), and AOA (Articles of Association) audit report of the previous fiscal year of corporate shareholders. All of the documents must be translated into English and notarized.
Documents for Company Registration:
- Copy of the MOA (Memorandum of Association) and AOA (Articles of Association) of the proposed subsidiary company
- Signed Form IX- (Consent of the Directors)
- Signed Form VI- (Declaration of the Registered Address)
- Signed Subscriber Page
Steps to Complete the Set Up of a Subsidiary Company
Name Approval of the Subsidiary Company
- Firstly, choose an appropriate available name for the subsidiary company.
- Then, apply through the web portal of RJSC.
- Deposit the required government fees to the bank.
- Get the name clearance certificate from RJSC.
Drafting the Required Documentation
The following documents need to be drafted.
- MOA (Memorandum of Association)
- AOA (Articles of Association)
- Form IX- (Consent of the Directors to Act)
- Form VI- (Notice of Situation of the Registered Address)
- Promoters’ Meeting Minutes/ Board Resolution
Opening a Non-Operating Bank Account
To receive inward remittances, a non-operating bank account with any scheduled commercial in Bangladesh needs to be opened in compliance with Bangladesh Foreign Exchange Regulations prior to applying for company registration with RJSC. Once the remittance has been received, the recipient bank will give an Encashment Certificate that details the purpose for payment. This Encashment Certificate will be verified by RJSC with the issuing bank prior to the company registration being confirmed.
Inward Equity Remittance in Bangladesh
The inward equity remittance process needs to be completed before submitting the company registration application to RJSC, as per the Bangladesh Foreign Exchange Regulations. The process is as follows-
- The shareholders must transfer the initial paid-up capital to the non-operating bank account.
- Transfer of the remittance must go via SWIFT.
- The payment may take 48-72 hours to arrive in Bangladesh.
- After the bank receives the equity remittance, it will give an Encashment Certificate.
- The remittance must have “Equity Investment” stated as its SWIFT purpose.
Filing to RJSC Web-portal Online
Upload the documents to the RJSC website.
- MOA (Memorandum of Association)
- AOA (Articles of Association)
- Form IX- (Consent of the Directors to Act)
- Form VI- (Notice of Situation of the Registered Address)
- Encashment Certificate
After that, the registration process will be done.
Company Registration Documents
After the online application is approved by the RJSC register, the firm will get the following documents as proof of the approval for company registration:
- Incorporation Certificate
- Certified Copies of MOA and AOA
- Certified Copy of Form-XII (Particulars of Directors)
Other Registration and Licences
Once the firm has received the certificate of incorporation from RJSC, it must apply for further trade licences, Tax Registration (E-TIN), VAT registration(BIN), and complete other required registration. Membership from the Chamber of Commerce, certificates of import registration, and export registration are necessary if the company intends to launch an import or export-related activity.
After following and completing these steps, the registration of the subsidiary company will be complete.
Now the process is a little complicated for which you may need help and professional advice. In this case, you can rely on Khan Akber & Co., a leading expert in helping foreign entities in setting up businesses in Bangladesh.
Summary
Bangladesh’s growth-oriented economy, scope for foreign investment, and prospects for tax exemptions make the country the perfect place to do business. Many foreign investors register their businesses here due to this. Among the different types of company registration, subsidiary company registration is a profitable option due to its flexibility. This blog mentions what a subsidiary company entails, its characteristics, statutory requirements, and the pros and cons of registering a subsidiary company in Bangladesh. Furthermore, it details the required documents and procedures for registering the subsidiary company. Now, if you are looking for an expert professional to help you set up your business in Bangladesh, Khan Akber & Co. is the perfect choice for you!
Frequently Asked Questions (FAQs)
Is a registered office address an essential requirement for the subsidiary registration process?
Yes, registering a company in Bangladesh requires having a physical location aka a registered office address.
Who is the governing body for foreign investment in Bangladesh?
BIDA (Bangladesh Investment Development Authority)is in charge of promoting foreign investment in Bangladesh. The duties of BIDA involve granting work permits to foreigners, visas to foreign investors, authorizing the remittance of royalties, and processing foreign loans among many other aspects.
What is the amount needed for subsidiary company registration in Bangladesh?
The permitted capital determines the government registration fees for a corporation. The government will charge BDT 1000 in order to issue an incorporation certificate.
Does Bangladesh allow 100% foreign ownership and investment?
Bangladesh allows 100% foreign investment in various areas.
How much time does it take for a company to register in Bangladesh?
RJSC typically issues the incorporation certificate in 6 to 8 days after all the necessary procedures are completed. A corporation can typically be registered in two to three weeks from the date all paperwork is submitted to RJSC.
