BANGLADESH LAW AND PRACTICE Contributed by: Shahwar Nizam, Tarannum Tasnim, Mahboob Aziz, Saif Bhuiyan, Farhan Kabir, Tanzim Ahmed and Rizvi Khan, DFDL Bangladesh
by Bangladesh Bank. Remittance of money outside Bangladesh is allowed only for specific circumstances and is required to be supported by appropriate docu - mentation. However, the foreign investment laws in Bangladesh are very pro-investor. Foreign investment and the rights of foreign investors are protected by the FPIP Act. There are both fiscal and non-fiscal incen - tives for investors, including corporate tax holidays for infrastructure projects under the public-private part - nership (PPP) regime, and for the automobile industry, in export processing and special economic zones, and in power and energy IT and information technology- enabled services (ITES). Bangladesh has also been impacted by the global hike in US dollar rates, as well as commodity and energy prices, resulting from the Russia-Ukraine war. As Bangladesh is a net importer of oil and gas, lique - fied natural gas (LNG), and soft and hard commodi - ties, the global price hike has adversely affected the economy. On top of this, the high US dollar price has also resulted in significant pressure on the local econ - omy. This has resulted in slow government payments for projects and suppliers, and an overall reduction in ratings for government debts and the economy as a whole. However, as Bangladesh has a large consum - er-based economy with around 170 million people, it is anticipated that after a period of adjustment the economy will start to make a recovery and is poised for growth in the next decade. Share acquisition or subscription is the most com - monly used structure in Bangladesh since there is no concept of a slump sale in this jurisdiction. It is not easy to transfer assets in Bangladesh as the docu - mentation and perfection requirements for each type of asset are different, and the transfer costs also dif - fer; moreover, for most assets the cost is substantially higher than share acquisition. Therefore, share acqui - sition is the most preferred structure for any invest - ment, be it a majority or minority investment. There is hardly any difference between the rules and regulations for public and private companies. 3. Mergers and Acquisitions 3.1 Transaction Structures
The principal legislation for all types of companies is the Companies Act 1994 (as amended in 2020) (the “Companies Act”). Only listed companies have additional regulations; therefore, there are additional requirements for acquiring shares in listed companies. Shares can be acquired through the secondary mar - ket in respect of listed companies. There are only a handful of instances where a listed company divested one or more of its business lines to its wholly owned subsidiary through a demerger scheme to onboard investors as majority shareholders. As discussed in 2.1 Recent Developments and Mar- ket Trends , Bangladesh has the most liberal FDI laws in South Asia. Most sectors in Bangladesh are open to foreign investment. Foreign investors can set up whol - ly-owned subsidiaries to undertake those businesses in Bangladesh. Given that any outward remittances (other than dividends) are restricted without special approval from the appropriate regulatory authority, foreign investors should consider the restrictions under the foreign exchange control laws in order to structure their investment. Investors should also con - sider the tax laws, as certain sectors and certain types of investment are subject to incentives that ensure greater returns for investors. Please refer to 9. Tax for further details. Investors should additionally consider the requirements for availing financing from local and foreign sources. There is a debt-to-equity ratio to con - sider in both cases. In addition to the foregoing, there are challenges related to land acquisition due to the scarcity of land in Bangladesh. Land titles must be verified carefully because land records are often archaic and manually maintained. 3.2 Regulation of Domestic M&A Transactions There are a handful of regulated sectors in Bangla - desh where foreign investment is subject to certain shareholding thresholds and regulatory approvals. Those sectors, and their shareholding restrictions, are covered in 1.2 Regulatory Framework for FDI and 2. Recent Developments and Market Trends . In addi - tion, please refer to 5. Capital Markets and 6. Anti- trust/Competitio n for other regulatory requirements relating to competition and listed securities.
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