BANGLADESH LAW AND PRACTICE Contributed by: Shahwar Nizam, Tarannum Tasnim, Mahboob Aziz, Saif Bhuiyan, Farhan Kabir, Tanzim Ahmed and Rizvi Khan, DFDL Bangladesh
4. Corporate Governance and Disclosure/Reporting 4.1 Corporate Governance Framework Foreign investors can establish their presence in Bangladesh by opening up liaison or branch offices and incorporating companies. A liaison office in Bangladesh can only undertake liaison, marketing and promotional activities; it is not allowed to generate local income. However, a branch office can obtain waivers from the Bangladesh Invest - ment Development Authority (BIDA) to generate local income and to remit the post-tax profit to the head office. Branch offices usually undertake service-based business activities, trading business and construction business. However, they can operate for a maximum of ten years in Bangladesh. Both a liaison office and a branch office operate in Bangladesh pursuant to approvals granted by BIDA upon application made by the foreign company. The BIDA approvals contain terms and conditions that the liaison office/branch office is required to comply with on a continuing basis. In its recently published guidelines, BIDA has intro - duced the concept of project offices. These are designed for foreign entities that need a short-term presence to work on government-commissioned pro - jects, such as EPC (engineering, procurement and construction) projects. The Companies Act, on the other hand, provides for different forms of legal vehicles for undertaking businesses. The most popular legal form of project vehicle is a limited liability company. A limited liability company can either be a private or public company, but private companies limited by shares are the most common form of vehicle for setting up a business in Bangladesh. Companies can be incorporated as subsidiaries of for - eign companies or joint ventures with local or other foreign partners. Such a company can engage in busi - ness, earn in local currency and remit post-tax profits to its foreign parent company without Bangladesh Bank approval. In addition, the Bangladeshi entity
can remit its annual revenue as royalties, technical know-how or technical assistance fees, operational services fees, marketing commissions, etc, with regu - latory endorsement from BIDA. The Companies Act further requires private limited companies to have a minimum of two directors, irre - spective of their nationality, who can either be in their individual capacity or as nominee of the corporate shareholders. In relation to equity investment, there is no minimum paid-up capital requirement for com - panies in Bangladesh, so a company can be incorpo - rated with as little as USD100 in paid-up capital. 4.2 Relationship Between Companies and Minority Investors Shareholders having at least a 10% stake in a com - pany may challenge in the court any decision of the company, the board of directors or its shareholders if such decision is prejudicial or discriminatory to such minority shareholders. 4.3 Disclosure and Reporting Obligations The reporting obligation to Bangladesh Bank lies with the relevant local bank handling the inward FDI remit - tance of the foreign subsidiary in Bangladesh. The bank is also required to report to Bangladesh Bank further allotment of shares, dividend repatriation and share transfer transactions. Further, prior approval is mandatory for transferring the shares of a foreign shareholder to a local shareholder as this involves outward remittance of purchase consideration from Bangladesh. As referred to in 1.1 Legal System , Bangladesh is a common law-based jurisdiction, and company-related laws are derived from English law principles. Public companies may list their shares in the stock markets through IPOs and collect additional funding from the primary market. Also, companies may obtain financing from the local banking market, usually through cor - porate financings. Non-recourse or limited recourse project financings for power and other infrastruc - ture projects in Bangladesh have also been seen. 5. Capital Markets 5.1 Capital Markets Overview
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