9. Investment Registration (BIDA)

CHAPTER 9 SECTION

IFOREIGN INVESTMENT IN BANGLADESH

1. General
   Foreign investors are free to make investment in Bangladesh in the industrial enterprises excepting a few reserved sectors as mentioned in the ‘Industrial Policy’ of the government in force. An industrial venture may be set up in collaboration with local investors or may even be wholly owned
   by the foreign investors. No permission of the Bangladesh Bank is needed to set up such ventures if the entrepreneurs use their own funds. However, to avail of the facilities and institutional support provided by the Government, entrepreneurs/sponsors may secure registration with Bangladesh Investment Development Authority(BIDA). For investment in Export Processing Zones(EPZs) and Economic Zones(EZs), such registration shall be done with the Bangladesh Export Processing Zones Authority(BEPZA) and Bangladesh Economic Zones Authority(BEZA) respectively.
2. Issue of shares in favour of non-residents
   
   1. Prior permission of the Bangladesh Bank is not required for issue of shares in favour of non-residents against foreign investment in Bangladesh; general permission is accorded in this behalf subject to the following conditions:
      
      1.  The industrial venture will have permission from the Registrar of the Joint Stock Companies and Firms(RJSCF)/The Bangladesh Securities and Exchange Commission(BSEC) about its capital issue.
      2. Shares may be issued either against freely convertible foreign exchange brought in from abroad through the banking channel or against import of capital machinery. Payment against such import must be made from abroad. However, foreign exchange thus brought in must be encashed in taka before issuance of shares except in the cases of Type A & Type B units of EPZs & EZs wherein equity in FC brought from abroad may be retained in FC accounts of the units concerned. In the case of issuance of shares against capital machinery, the machinery have to be cleared from the Bangladesh Customs first. Beside, shares may be issued in favour of non-residents by debit to non-resident Taka accounts maintained by ADs in the names of their overseas branches and correspondents against inward remittance in convertible currencies. Hence ADs may issue certificate in support of payment
         from such account for purchase of shares in Bangladeshi companies. In the context of certificate issuance to the beneficiary, ADs shall follow the format in Appendix 5/39 in case of payment from non-resident Taka account and the format in Appendix 5/40 in case of payment against
         inward remittance in foreign currency.
      3. Foreign Exchange Investment Department, Bangladesh Bank, Head Office must be informed through the concerned AD about the issue of shares to non-residents pursuant to (a) & (b) above with mentioning ‘Reporting Transaction ID’ to the ‘Online Foreign Exchange Transaction
         Monitoring System’ of Bangladesh Bank, within 14(fourteen) days of such issue, alongwith the following documents/papers:
         
         1.  attested copy of the permission for the capital issue accorded by the RJSCF/BSEC;
         2.  attested copy of the registration, if any, of the foreign investment in the industrial ventures accorded by the BIDA/BEPZA/BEZA;
         3.  copy of encashment certificate of foreign exchange in Taka authenticated by the AD in case of issue of shares against foreign exchange received from abroad through the banking channel or from non-resident Taka accounts (Appendix 5/39 or 5/40 as the case may be); and
         4. for issue of shares against foreign investment in the form of capital machinery, the authenticated copy of bill of entry evidencing clearance of the capital machinery from the Custom Authorities, copies of the related import permit, invoice, bill of lading/air way bill, etc.
   2. Transfer of Bangladeshi Shares/Securities
      Transfer of Bangladeshi shares and securities from one shareholder to another irrespective of their nationality/residency would not require Bangladesh Bank approval. No intimation to Bangladesh Bank is required in case the transfer is effected between residents. However, for the transfer of shares of private/public limited companies not listed in the stock exchanges, from resident to non-resident, non-resident to resident and non-resident to non-resident, FEID, Bangladesh Bank, Head Office should be informed, through the concerned AD within 14(fourteen) days, of such transfer along with the following documents:
      
      1.  copy of encashment certificate, authenticated by the concerned AD, of foreign exchange in Taka credited to the account of transferor in case of transfer of shares from resident to non-resident;
      2.  attested copy of the permission for the transfer accorded by the RJSCF/BSEC;
      3.  attested copy of up-to-date Schedule-X.
   3. Temporary Non-resident Taka Account (NRTA) for Foreign Investors
      ADs may open NRTA in the name of the proposed company/enterprise of foreign investors contemplating to invest in Bangladesh without prior approval of Bangladesh Bank. Such accounts may be credited with inward remittances received from abroad only. Upon registration/commencement of the business, a new account in the name of the company may be opened following usual procedure. However account opened previously should be closed immediately and balances lying therein shall be transferred to the new account. If, for any reason, the proposed investment/incorporation does not take place, the balance of the account, after meeting the required expenses, may be allowed to be repatriated without prior approval from Bangladesh Bank. However, ADs shall report opening and closure of such accounts to FEID and FEOD, Head office/concerned office of Bangladesh Bank immediately along with attested copy of form ‘C’/TM form (as the cases may be) with particulars of transactions.
3. Remittance of sales proceeds of non-residents’ investment (direct/portfolio) in Bangladesh
   Guidelines for effecting remittance of sales proceeds of non-residents’ investment in Bangladesh are as under:
   
   1.  Shares of the public limited companies listed with stock exchange(s) Prior approval of Bangladesh Bank is not necessary for remitting the sales proceeds of securities held by non-residents. In such cases, repatriable amount must not exceed the market price of
      securities prevailing in the stock exchange on the date of sales.
   2.   Shares of the public limited companies not listed with stock exchange and private limited companies
      Prior approval of Bangladesh bank is required for repatriation of sales proceeds of non-residents equity investment in the: (1) public limited companies that are not listed with the stock exchange companies; and (2) private limited companies. There being no established market price for such
      investment, Bangladesh Bank will accept fair value of the shares as on the date of sale based on appropriate combination of three valuation approaches (viz. net asset value approach, market value approach and discounted cash flow approach) depending on the nature of the company. Application for repatriation of sale proceeds of shares shall be submitted to FEID at head office of Bangladesh Bank with a Valuation Certificate of shares issued by a Merchant banker licenced by BSEC or a Chartered Accountant experienced in company valuation. Appendix-6/3 of this Guidelines provides indicative guidelines for arriving at fair value. The valuation certificates by eligible valuers will have to be supported by full explanation justifying the fair value arrived at. Full set of audited financial statements of the company will have to be submitted to Bangladesh Bank along with application for remittance approval. If not fully satisfied about appropriateness of the valuation arrived at, Bangladesh Bank reserves the right to obtain second opinion from another qualified valuer of its choice. If calculated fair value (accepted by Bangladesh Bank) exceeds the face value of the share of the company concerned, capital gain derived therefrom may also be repatriated. However, only accepted fair value shall be considered as repatriable/or for re-investment in Bangladesh. Prior permission of Bangladesh Bank is not required for sales/transfer of shares of public limited companies not listed with the stock exchange companies by one non-resident to another non- resident.
4. Portfolio investment by non-residents
   Non-resident persons/institutions including non-resident Bangladesh nationals may buy Bangladeshi shares and securities in Bangladesh against freely convertible foreign currency remitted from abroad through the banking channel. Transactions relating to such investments including repatriation of dividend/interest earnings and sale proceeds shall be made through a Non-resident Investor’s Taka Account (NITA) according to the procedure described in Section-IV, Para 24, Chapter 14.
5. For the purpose of investment through Stock Exchange or in new public issue by non-residents, securities will have the same meaning as defined in section 2(k) of the FER Act, 1947.
6. After the shares/securities have been purchased by the non-resident investor, the related certificates/scripts can be deposited/kept with any person/organisation nominated by the investor. The investor can as well take them outside the country, if he/she so desires.

SECTION – IIOPERATIONS IN SECURITIES

7. Definition of security
   Section 2 of the FER Act, 1947 defines “security” either in physical or demat form,-
   
   1.  shares, stocks, bonds, debenture stock and Government securities, as defined in the Securities Act, 1920;
   2.  deposit receipts in respect of deposits of securities, units of mutual fund or collective investment scheme, as defined in Securities and Exchange Commission (Mutual Fund) Rules, 2001; and
   3.  other instruments defined as security in the Securities and Exchange Ordinance, 1969 (Ordinance No. XVII of 1969); but does not include bill of exchange or promissory notes other than Government promissory notes. A “foreign security” is defined as a security issued elsewhere than in Bangladesh and any security the principal of or interest on which is payable in any foreign currency or elsewhere than in Bangladesh.
8. Import and export of securities
   There is no restriction under the FER Act, 1947 on the import of securities into Bangladesh. No securities can however be exported or taken out of Bangladesh without general or special permission of Bangladesh Bank. Residents in Bangladesh who are holders of foreign securities and who wish to send the securities to banks, brokers or agents abroad for the purpose of sale, transfer etc. should apply to the Bangladesh Bank through an AD for necessary export permit. Permission for transfer of such securities will be granted provided the AD gives an undertaking that the securities will be received back in Bangladesh within a specified period, or in the case of sale, the foreign currency proceeds of the sale will be repatriated to Bangladesh. Bangladesh
   Bank is also prepared to consider applications for the exchange of foreign shares and/or securities held by residents of Bangladesh with Bangladesh shares and/or securities held by residents abroad. Applications for this purpose should be made through an AD or Stock and Share Broker. Such applications would be considered favourably provided the Bangladeshi shares/securities desired to be imported from abroad are approximately of the same market value as foreign shares and/or securities that are desired to be exported.
9. Transfer of securities to non-residents In terms of clause (b) of sub-section (1) of Section 13 of the FER Act, 1947 transfer of any
   security or creation or transfer of any interest in a security to or in favour of a person resident outside Bangladesh is prohibited except with the general or special permission of the Bangladesh Bank. It should be noted that this prohibition applies to transfer of (i) all Bangladesh securities (i.e. securities expressed to be payable in Bangladesh currency or registered in Bangladesh) whether held by person resident in or outside Bangladesh, and (ii) all foreign securities held by persons resident in Bangladesh. However, in the case of securities registered in Bangladesh, Bangladesh Bank has accorded general permission for
   issuance and transfer of shares/securities in favour of non-residents against foreign investments in freely convertible foreign exchange or in the form of capital machinery (please see Para 2 of this chapter for details). The prohibition imposed against transfer or creation of any interest in a security to or in favour of a non-resident in terms of clause (b) of sub-section 13 of the FER Act, 1947 precludes the pledging or hypothecating of securities to or in favour of non-residents e.g. as collateral or security for credit facilities abroad (please see Chapter 16, Section- I) or utilising them for forming trusts or settlements, of which a non-resident is the beneficiary.
10. Other provisions
    
    1. Clauses (c) and (d) of sub-section(l) of Section 13 of the FER Act, 1947 prohibit, respectively, transfers of securities from registers in Bangladesh to registers outside Bangladesh and the issuing, whether in Bangladesh or elsewhere of securities which are registered or to be registered
       in Bangladesh, to persons resident outside Bangladesh except with the general or special permission of the Bangladesh Bank.
    2. For the purpose of Section 13 of the Act, “a person resident outside Bangladesh” or a “non-resident” includes a foreign national for the time being resident in Bangladesh.
11. Holding/retention of foreign securities Persons resident in Bangladesh who are or become owners of foreign securities are permitted to hold or retain such securities provided they have acquired them in a manner not involving a breach or violation of the foreign exchange regulations. Holders of foreign securities who wish to sell, transfer or otherwise dispose of or deal in securities must, however, ensure that the proposed transactions do not contravene the provisions of the FER Act, 1947 and the orders issued by the Government of Bangladesh and/or the Bangladesh Bank thereunder and must obtain prior permission of the Bangladesh Bank wherever necessary.
12. Submission of return by holders of foreign securities Under the existing foreign exchange regulations all persons resident in Bangladesh who are or become the owners of any security in respect of which the principal, interest or dividend is/are payable in the currency of any foreign country or in respect of which the owner has the option to acquire the payment of principal, interest or dividend in such currencies, are required to submit a return to the Bangladesh Bank within one month of their acquiring the securities giving certain particulars in respect of the said securities. The specimen of the return in which these particulars are required to be furnished in duplicate is given in Appendix 5/41. Citizens of Bangladesh having dual nationality/persons usually residing outside Bangladesh/foreign nationals for the time being residing in Bangladesh are not required to submit the said return.