Monday, May 26, 2008

Company Formation - Part II
May 26, 2008

(For an index of all of my Company Formation in Bangladesh blogs, click here: Forming a Company in Bangladesh)

The monsoon has arrived and with it a new set of challenges (not the least of which is figuring out how to get to my meetings without looking like a drowned rat!) I met with the Board of Investment (BOI) yesterday and have learned more about the requirements for foreigners setting up companies in Bangladesh.

I have been trying to set up a company bank account here in preparation for the equity infusion and subsequent property purchase for Panigram Resort. Sadly, we are back to the chicken-and-egg scenario again, however, because I need a work permit to set up a corporate bank account, but I can't get my work permit until I get my investor visa, which I can't get until I can deposit $50,000 USD, which I can't do until I have a bank account. You see the dilemma...

The Director of Research and Investment at BOI told me, however, that I am allowed to set up a bank account now that I have my company formation documents, but that I won't be able to operate the account until I have my work permit. Apparently this means that I will be able to deposit money in, but that I will not be able to take the money out again until I get the work permit.

Additionally, I learned more about the investor visa and work permit process. I need to first apply for my investor visa. To do this I need to hand over a large checklist of items, including an encashment certificate for $50,000 (though the Director said that I could just transfer $5,000 to start and could transfer the balance when I applied for my work permit), to the Board of Investment. They will then prepare a letter which they will send to the Bangladesh Embassy in either Washington or New York. I then have to go there to apply for my investor visa. Thankfully the timing actually works out well since I am going back to the U.S. on June 23rd anyway for a month to see my family and friends and will be in New York for a week during that trip.

So for those foreigners out there who may be thinking about starting a company in Bangladesh, here are the steps (in order) that you need to take (that I have discovered so far!)

Note: There are slight variations depending on whether you are a "commercial" investor or an "industrial" investor. For information on the differences, see my blog posting: How to Set Up a Company in Bangladesh Part III.

Steps that Foreigners Need to Take to Set Up a Company in Bangladesh (in order):
  1. Find a good attorney!
  2. Decide on the structure of your company
  3. Decide what the authorized capital of your company will be
  4. Get a cost estimate for the legal work and registration fees
  5. Select a name
  6. Prepare the minutes of your first board meeting
  7. Get encashment certificates (can be a small amount - a few hundred dollars)
  8. Assemble the required company formation paperwork
  9. Review all of the documents carefully
  10. Submit the name registration (have your attorney do this)
  11. Submit the company registration documents (have your attorney do this)
  12. Pick up your registration documents and make several copies of them (you will need them for bank accounts, VAT, etc.)
  13. Set up a meeting with the Board of Investment (BOI) and pick up the BOI Registration form, the investor visa checklist, and the work permit checklist
  14. Get a corporate seal. (This is just a rubber stamp that you order from a stationary store with your company name and address on it.)
  15. Take your company formation documents, passport copy, etc. to the bank and set up a bank account. Be sure to tell them that you know you can't have an operating account until you get a work permit, but that you need a non-operating bank account so that you can transfer the initial money into the country if you need to get encashment certificates. (Important: your company bank account must be a Taka account, not a foreign currency account.)
  16. Transfer at least $50,000 into your company bank account and ask for encashment certificates. (You can get permission from the BOI to only transfer in $5,000 to start if you want, but you must transfer in the remaining $45,000 before you are allowed to get your work permit.) This is only necessary if you are setting up a "commerical" enterprise. See my blog post: Setting Up a Company in Bangladesh Part III. For "industrial" enterprises, like my business, talk to the Director (Mamdood Alamgir) to see how much money, if any, you need to transfer in.
  17. Purchase the land or sign the lease for the property where your business will be located. (You need this in order to complete the Board of Investment Registration which you have to have to apply for many of the other steps.)
  18. Apply for your tax ID number (TIN) in the division where your business will be operated. As a foreigner, you may also be able to apply for your TIN in Dhaka.
  19. Apply for your trade license in the upazila where your business will be operated.
  20. Submit the BOI Registration form to the BOI. With this you will have to submit copies of your Memorandum and Articles of Association, deed or lease agreement, project profile (if your project is 50 million Taka or more; this is just a business plan), check for registration, TIN, trade license, completed form, and business plan or summary (which has your company financials on it.) See my blog post: Setting Up a Company in Bangladesh Part IV for more information on BOI Registration.
  21. Submit the documents on the investor visa checklist (the investor visa checklist is different depending on whether you are a "commercial" or "industrial" investor; see my blog entry: Setting Up a Company in Bangladesh Part III) to BOI and have them prepare a letter to send to the Bangladesh embassy in your home country. You can not change your visa category while in Bangladesh, but you can extend an existing visa in Bangladesh. You need a business visa or an investor visa to get a work permit (which you need to open your bank account and run your company). (See Setting Up a Company in Bangladesh Part V: Investor Visas and Work Permits for more information.)
  22. In your country, take the required visa documents and the BOI letter to the Bangladesh embassy/ consulate and apply for your Investor Visa. (Again, see Setting Up a Company in Bangladesh Part V: Investor Visas and Work Permits for more information.)
  23. Apply for your work permit. (If you didn't transfer in the full $50,000 when you applied for your investor visa, you will need to transfer in the rest of the money and get encashment certificates before you can apply for your work permit if you are a "commercial" investor.)
  24. Go back to your bank with your work permit and have them make your bank account an operating account
  25. Apply for your VAT tax ID
  26. Apply for a tax holiday at the Tax Department at the National Board of Revenue (if your business is applicable for such a holiday. All resorts and tourist operations are applicable.)
(Steps 1-11 are discussed in more detail in my first blog on Bangladeshi company formation:

If you change ownership or sell shares of your company you will need to amend your BOI Registration. (See Company Formation in Bangladesh - Part VI: Amending Your BOI Registration for more information.)

I will let you know more as I continue to go through this process!


At Monday, May 26, 2008 11:53:00 PM, Blogger Donny said...

wow makes my head swirl

i was told by Jen that you have a neat article discussing the development level of different cultures. could you pass that my way?


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