Foreign entities operating in Bangladesh through Liaison Offices (LO), Branch Offices (BO), or Project Offices (PO) must navigate a specific regulatory pathway when ceasing operations. Unlike locally incorporated companies which undergo liquidation under the Companies Act 1994, these offices follow a distinct closure process primarily overseen by the Bangladesh Investment Development Authority (BIDA), alongside the National Board of Revenue (NBR) and Bangladesh Bank (the central bank).
The closure process ensures all statutory obligations, financial liabilities, and regulatory requirements are met before the foreign parent company formally exits its presence established through the LO, BO, or PO. It involves obtaining clearances from multiple governmental bodies, settling outstanding dues, and formally notifying the authorities of the cessation of activities.
Initiating the Closure Process#
The decision to close an LO, BO, or PO typically originates from the foreign parent company. This decision must be formally documented through a Board Resolution passed by the parent company’s board of directors. This resolution should explicitly state the intention to close the specific office in Bangladesh, authorise a representative (often through a Power of Attorney) to handle the closure formalities, and specify the intended effective date of closure.
The authorised representative, equipped with the Board Resolution and Power of Attorney (which usually require notarisation and consularisation/apostille depending on the parent company’s jurisdiction), initiates the formal closure procedures in Bangladesh.
Key Steps and Regulatory Clearances#
Closing an LO, BO, or PO involves a sequence of steps aimed at settling all obligations and obtaining necessary approvals:
1. Newspaper Publication#
A public notice announcing the intended closure of the office is typically required to be published in at least one widely circulated national daily newspaper (both Bengali and English versions may be advisable). This serves to inform the public, including potential creditors, of the impending closure. Proof of this publication will be needed for subsequent steps.
2. Settlement of Liabilities#
The office must meticulously settle all outstanding dues. This includes payments to employees (final salaries, benefits, severance pay as mandated by the Bangladesh Labour Act 2006), suppliers, landlords, utility providers, and any other creditors. Obtaining receipts or clearance letters from these parties is crucial, as evidence of settlement is required by the authorities.
3. Tax Clearance and BIN Closure#
Obtaining a Tax Clearance Certificate from the National Board of Revenue (NBR) is a fundamental requirement. This involves settling all outstanding income tax, Value Added Tax (VAT), and other applicable tax liabilities accrued by the office up to the date of cessation. The NBR will conduct a final assessment, often requiring the submission of audited financial statements covering the period up to the closure date and all relevant tax returns. Concurrently, the office must apply for the cancellation of its Business Identification Number (BIN) or VAT registration. Compliance with the Income Tax Act 2023 and the Value Added Tax and Supplementary Duty Act 2012 is verified before the tax clearance certificate and confirmation of BIN cancellation are issued.
4. Application to BIDA#
A formal application for closure must be submitted to BIDA, the authority that granted the initial permission for the office. This application package typically includes: * The parent company’s Board Resolution and Power of Attorney. * Reasons for closure. * Details of the authorised representative. * Proof of newspaper publication. * Evidence of liability settlements. * The Tax Clearance Certificate and BIN cancellation proof from NBR. * Audited financial statements up to the closure date.
5. BIDA Issues Closure Order#
After reviewing the application and supporting documents (excluding bank closure/remittance details at this stage), BIDA will, if satisfied that the preliminary requirements have been met, issue a formal letter or order confirming the closure and cancellation of the permission previously granted to the LO, BO, or PO. This order is usually conditional upon the final steps being completed.
6. RJSC Notification#
Following the receipt of the closure order from BIDA, the necessary filings or notifications confirming the closure must be made with the Registrar of Joint Stock Companies and Firms (RJSC). This is a mandatory step for formally recording the cessation of the office’s registered presence.
7. Bank Account Closure and Fund Remittance Approval#
As the final step, once the BIDA closure order is received and RJSC notification is filed, the office’s local bank accounts must be formally closed. A certificate or statement from the bank confirming the closure is necessary. If there are remaining funds originating from initial inward remittances, an application must be made to the Bangladesh Bank for approval to repatriate these funds, supported by the BIDA closure order and evidence of liability settlement. This process ensures compliance with the Foreign Exchange Regulation Act 1947 and associated guidelines. The central bank scrutinises the source of funds before granting permission for outward remittance. Proof of bank account closure and final fund remittance (if any) completes the winding-up process.
Visualising the Closure Pathway#
The general sequence for closing an LO, BO, or PO can be visualised as follows:
Considerations and Best Practices#
The timeline for closure can vary significantly, often taking several months, depending on the complexity of the office’s operations, the efficiency of obtaining tax and central bank clearances, and the completeness of the submitted documentation. Engaging experienced legal and financial advisors early in the process is highly recommended to navigate the requirements of BIDA, NBR, and Bangladesh Bank effectively. Maintaining meticulous financial and operational records throughout the life of the office is essential, as this significantly streamlines the clearance procedures. Any pending litigation or disputes involving the office must also be resolved before closure can be finalised.
For assistance with navigating the closure process for your Liaison, Branch, or Project Office in Bangladesh, please reach out to:
- Ariful Hasan
- Phone: +8801975603559
- Email: [email protected]
- Osman Goni
- Phone: +8801715569498
- Email: [email protected]