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Incorporating a Company with Local Shareholders in Bangladesh

Table of Contents

Setting up a company in Bangladesh using only local (Bangladeshi) shareholders is a common choice for local business owners. The Companies Act 1994 governs this process, which is managed by the Registrar of Joint Stock Companies and Firms (RJSC), mostly through its website. Knowing the different company types, the registration steps, and what needs to be done after registration will help local businesses to avoid common pitfalls. This guide explains how to set up a private or public limited company using only local investment and ownership.

Notes for Foreign Investors
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This is a guide for incorporating companies with only local shareholders. If you are a foreign investor, please see this guide.

Choosing the Right Company Structure
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Picking the right company structure is an important early decision that affects how the company is run, how it raises money, and the rules it must follow. For businesses funded entirely by Bangladeshis, the main choices under the Companies Act 1994 are the Private Limited Company and the Public Limited Company.

Private Limited Company
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A Private Limited Company is often chosen for small to medium businesses (SMEs), family companies, or when owners want to keep ownership within a small group. Key points include:

  • Members: Needs at least two shareholders and can have a maximum of fifty. This keeps ownership tight.
  • Selling Shares: The company’s internal rules (Articles of Association) must limit how shareholders can sell their shares. Often, existing shareholders get the first chance to buy, or the board must approve sales.
  • No Public Investment: A Private Limited Company cannot ask the general public to buy its shares or bonds. This limits raising money through things like an Initial Public Offering (IPO).
  • Simpler Rules (Relatively): While still needing to follow many regulations, the rules (like for meeting notices or appointing directors) can sometimes be simpler than for a public company.

Public Limited Company
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A Public Limited Company suits larger businesses that might need a lot of investment and may want to get funds from the public. Key features are:

  • Members: Needs at least seven shareholders, with no maximum limit. This allows many people to own shares.
  • Selling Shares: Shares in a Public Limited Company can usually be sold freely, unless the Articles of Association have specific reasonable limits. This makes shares easier to buy and sell.
  • Raising Public Money: Public Limited Companies can ask the public to buy shares or bonds, usually through an IPO. This is subject to strict rules from the Bangladesh Securities and Exchange Commission (BSEC).
  • Stricter Governance: Public companies have tougher rules for how they are run, possibly needing independent directors and requiring more information to be made public, because they are accountable to the public.
Individual entrepreneur should also know about the One Person Company (OPC), a special type of private company for just one individual shareholder.

The Registration Process via RJSC
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Registering both private and public limited companies is now a single-step process through the RJSC’s online portal (www.roc.gov.bd).

graph TD; A["Start: Prepare MoA, AoA & Gather Docs (Proposed name, Shareholder, Director)"] --> B{"Submit Unified Application via RJSC Portal (Upload Docs)"}; B --> C{"Pay Registration Fees & Stamp Duty"}; C --> D{"RJSC Scrutiny & Verification (Name & Docs)"}; D -- "Queries Raised / Name Rejected" --> B; D -- "Approved" --> E["Receive Certificate of Incorporation"]; E --> F["End: Company Registered"];

1. Prepare Documents
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To start a company, you’ll need these documents:

  • Memorandum of Association (MoA): This core document sets out the company’s basics: its name, registered office location (district), the specific business activities it plans to do (objects), a statement that members’ liability is limited, and the maximum amount of share capital it can issue (authorised capital). Clearly defining the business activities is important, as doing things outside this list might not be allowed (ultra vires). You’ll need the object clause for the online submission.
  • Articles of Association (AoA): These are the internal rules for running the company. They cover how shares are issued and transferred, how meetings (like Annual General Meetings - AGMs) are held, how directors are appointed and what powers they have, how profits (dividends) are shared, and other operational rules. Standard templates are available, but getting legal help to tailor the AoA to your specific business and shareholder agreements is a good idea. You’ll need the full copy for online submission.
  • Form XI (Consent to Act as Director): People who will be directors need to sign this form. A scanned copy is needed for the online submission.
  • Subscriber Page: This lists each shareholder’s name and the number of shares they agree to take. A scanned copy is needed.
  • Form I (Declaration of Registration): This declaration confirms the company’s registration details. Ideally, a director, secretary, or managing director should sign it. A scanned copy is needed.

2. Gather Shareholder and Director Information
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You need correct information about the first shareholders (subscribers) and the proposed directors for the registration. For Bangladeshis, this usually includes:

  • Full legal name, father’s/mother’s/spouse’s name, permanent and current addresses.
  • Scanned copy of National ID (NID) card.
  • Scanned copy of electronic Taxpayer Identification Number (e-TIN) certificate.
  • Proof of nationality.
  • Job details.
  • Number of shares each shareholder is taking.

3. Online Submission and Document Upload via RJSC Portal
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The current system requires applying for registration online. You’ll need to provide all required information, including the company name you want.

  • Create an account on the RJSC portal.
  • Enter the proposed company name.
  • Fill out the online forms correctly (these combine information previously needed on paper forms like Form IX - Director Consent, Form XII - Director Details, etc.).
  • Upload clear, scanned copies of the signed MoA and AoA (signed by all subscribers, with witness details).
  • Upload NID and e-TIN certificates for all directors and subscribers.
  • Submit the application electronically.

Note: If the proposed name is rejected, you will need to redo Form IX and Form I with the new approved name.

4. Payment of Government Fees and Stamp Duty
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Setting up a company involves paying government fees:

  • Registration Fees: Based on the planned authorised share capital (check RJSC for current rates).
  • Stamp Duty: Paid on the MoA and AoA, also based on authorised share capital. Pay this through specific banks or treasury challan and submit proof to RJSC.

The RJSC website usually has a fee calculator or schedule.

5. RJSC Review and Verification
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After submission and payment, RJSC officials check the application and documents carefully. They ensure everything follows the Companies Act 1994, all information is complete and correct, and documents like NIDs and TINs are valid. If there are issues (missing information, errors), RJSC will contact you online asking for changes or explanations. Responding quickly helps avoid delays.

6. Getting the Certificate of Incorporation
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Once RJSC confirms all legal and procedural steps are met, it issues the Certificate of Incorporation electronically (often with a digital signature). This certificate shows the company’s name, registration number, and incorporation date. It’s the official proof the company legally exists from that date, giving it its own legal identity separate from its owners.

Key Steps After Incorporation
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Getting the Certificate of Incorporation means the company exists, but several important steps are needed before starting business operations:

  • Get a Trade Licence: A required licence from the local government (City Corporation, Municipality, etc.) where the company’s main office is. It allows the company to operate in that area.
  • Get a Corporate e-TIN Certificate: The company needs its own tax ID number (e-TIN) from the National Board of Revenue (NBR), separate from the owners’ personal TINs. This is needed for all tax matters, like filing annual tax returns.
  • Get VAT Registration (BIN): If the company’s business type and annual sales meet certain levels, it must register for Value Added Tax (VAT). This means getting a Business Identification Number (BIN) from the NBR’s VAT Online system.
  • Open a Company Bank Account: Open a bank account in the company’s registered name. This is vital for managing money, receiving funds, making payments, and keeping clear financial records. Banks will need the Certificate of Incorporation, MoA, AoA, board resolution, and director/signer details.
  • Register with Specific Authorities (If Needed): Some industries need extra licences from specific regulators. Examples include the Bangladesh Investment Development Authority (BIDA) for certain benefits or reporting, the Department of Environment, the Chief Inspector of Factories, or sector regulators (like BTRC for telecom, Bangladesh Bank for finance).
  • First Board Meeting: Hold the first Board of Directors meeting soon after incorporation to officially appoint the Chairman, approve the bank account opening, appoint auditors (if needed right away), and handle other initial setup tasks.
  • File Return of Allotment: If shares are issued after the initial setup, file a return of allotment (Form XV) with RJSC within the set time.

Ongoing Responsibilities
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Having a company means ongoing legal and administrative duties. Key tasks include:

  • Keep Statutory Books: Companies must keep updated records (registers) of members, directors, loans (charges), etc., at their registered office.
  • Annual General Meeting (AGM): Hold an AGM as required by law (usually within 18 months of starting, then yearly).
  • File Annual Returns: Send an annual report to RJSC with details on shareholders, directors, and capital after the AGM.
  • File Financial Statements: Submit audited financial reports (balance sheet, profit/loss statement) to RJSC after the AGM.
  • Tax Compliance: File annual corporate income tax returns with NBR and follow VAT and other tax rules.
  • Board Meetings: Hold regular board meetings as required by the AoA and the Companies Act 1994.

Incorporating a company with local shareholders in Bangladesh is simpler with RJSC’s online system, but it still requires careful attention to legal details and procedures. Good planning, accurate documents, and knowing the post-incorporation and ongoing rules are essential for setting up a solid and ready-to-operate business. Getting professional legal and accounting help during this process is often wise.

Key Contact

For assistance with company formation in Bangladesh, please reach out to: