Foreign Direct Investment (FDI)




Legal Protection of Foreign Investment

  • The Foreign Private Investment (Promotion & Protection) Act, 1980 ensures legal protection to foreign investment in Bangladesh against nationalization and expropriation.
  • It guarantees non-discriminatory treatment between foreign and local investment.
  • It guarantees repatriation of capital and return from it and the residual amount in the event of liquidation of industrial undertaking having such investment.
  • It also guarantees repatriation of compensation in the event of losses of foreign investment owing to civil commotion, insurrection, riot etc.

FDI through Setting up a Company

  • Foreign investors can open Temporary Non-Resident Taka Account (NRTA) with an Authorized Dealer (AD) in the name of their proposed venture in Bangladesh.
  • Temporary NRTA helps park foreign equity and make necessary preliminary expenditures before incorporation of the company.
  • No prior permission of Bangladesh Bank (BB) is required.
  • In case of non-formation of the proposed venture, the balance of that account are freely remittable abroad.

FDI in an Existing Company (Issuance of Shares)

  • Foreign investor can purchase shares against remittance received from abroad through formal banking channel and imported capital machinery in which payment is settled abroad by the investor.
  • No prior permission of Bangladesh Bank (BB) is needed for issue of shares against foreign investment in Bangladesh. Before issuance of shares, remittance must be received and capital machinery must be cleared from the Bangladesh Customs.
  • Encashment of foreign equity isn't mandatory if the share issuing companies are located in Bangladesh Export Processing Zones (BEPZ), Bangladesh Economic Zones (BEZ) and Bangladesh Hi-Tech Park (BHTP) areas. In addition, foreign equity (inward remittance) received by companies other than those specialized zones may be kept by opening foreign currency account (FCA) in the name of investee companies for a period of one year and balances can be used for meeting overseas capital expenditures.
  • After issuance of shares in favor of non-resident investor and completing necessary formalities with the Registrar of Joint Companies and Firms (RJSC&F), Foreign Exchange Investment Department (FEID), BB must be informed through the concerned AD within 14 (fourteen) days [Guidelines for Foreign Exchange Transactions (GFET)-2018, Chapter-9, Para-2(A)].

Transfer of Shares and Sale Proceeds

(i) Resident to Non-resident:

  • Prior permission of BB is not required for transfer of shares.
  • Transfer is subject to share fair value of the target company.
  • Valuation report (issued by a Merchant Banker licensed by Bangladesh Securities and Exchange Commission (BSEC) or a Chartered Accountant listed by BB and/or BSEC) is mandatory if deal value exceeds Tk. 1 (one) million.
  • Sale proceeds of shares must be credited to the bank account of the seller (resident) from abroad before transfer.
  • Intimation to be made to FEID, BB within 14 (fourteen) days of such transfer through the concerned AD [GFET-2018, Chapter-9, Para-2(B)].

(ii) Non-resident to Non-resident:

  • Prior permission of the BB is not required for transfer of shares.
  • Transfer is subject to share fair value of the target company.
  • Valuation report (issued by eligible valuer) is mandatory if deal value exceeds Tk. 1 (one) million.
  • Intimation to be made to FEID, BB within 14 (fourteen) days of such transfer through the concerned AD [GFET-2018, Chapter-9, Para-2(B)].

(iii) Non-resident to Resident:

  • Fair value of shares is repatriable without prior permission or with permission (selective cases) of BB.
  • BB accepts fair value of the shares based on appropriate combination of three valuation approaches (viz. net asset value approach, market value approach and discounted cash flow approach) or on any of the suitable approaches depending on the nature of the company.
  • No prior permission is required for transfer and repatriation of share sale proceeds abroad if-
    1. transfer/deal value per share doesn't exceed Net Asset Value (NAV) per share and fulfill some other conditions (such as no revaluation reserve, intangible assets, expenses/loss shown as asset etc.); no amount limit, no valuation report.
    2. transfer value up to Tk. 10 (ten) million without valuation report.
    3. transfer value up to Tk. 100 (hundred) million with valuation report by eligible valuer.
  • Otherwise, prior approval is required and necessary documents to be submitted with application through the concerned AD.
  • Intimations related to shares acquired (through issuance or transfer) by non-resident must be completed as per GFET-2018, Chapter-9, Para-2(A) and Para-2(B).

Remittance of Dividend

  • No prior approval of BB is required for remitting cash dividend (net of tax) to non-resident shareholders.
  • No post facto reporting of such remittance to BB.
  • Dividend amount can be used for reinvestment in Bangladesh (i.e., further issuance of shares).
  • Dividend amount can be credited to Foreign Currency Account (FCA) of non-resident shareholder maintained in any local bank.
  • Encashment of money held in that FCA will be treated as inward remittances and may be used for FDI and other bonafide local disbursements.
  • Dividend files are to be kept for eventual inspections by BB or other regulatory agencies.

Residual Claims in Liquidation (Winding up)

  • Upon liquidation of a company, money payable to non-resident shareholder after meeting all liabilities and expenses is repatriable abroad with prior permission of FEID, BB.
  • Winding up a company may be happened voluntarily, by the Honorable Court and subject to supervision of the Court.
  • Necessary documents to be submitted with application through an AD.