Conditions and Requirements for Establishing Branch Offices and Liaison Offices in Bangladesh

This article highlights the conditions and capital requirements that foreign companies must consider when planning to expand their operations into Bangladesh through branch offices or liaison offices. Understanding these guidelines is crucial for ensuring legal compliance and successful business ventures in the country.

Capital requirement of Parent company for establishing Branch office / Liaison office in Bangladesh:

The following points must be considered while granting permission to foreign companies/organizations to set up branch offices in Bangladesh:

1. In the country where the foreign company/organization is incorporated/registered-

(a) The said company/entity should have documentary evidence of continuous profit-making for the previous three financial years and have net assets of at least 1.00 (one) lakh US dollars or its equivalent; or

(b) At the time of application, the said company/organization should have accumulated profits despite loss-making, and at the time of application, the company/organization should have minimum net assets of USD 1.00 (one) million or its equivalent.

(c) If the applicant foreign company/organization is not financially sound alone, the subsidiary company (if any)/subsidiary company (if applicable)/holding company (if applicable) of the said company/organization can give a minimum 10.00 (ten) million USD or its equivalent financial solvency undertaking on behalf of the said applicant foreign company/organization. In this case, if necessary, the concerned company/organization will provide the undertaking letter regarding providing financial assistance. Provided that for the purposes of this paragraph, the financial solvency of the concerned company/organization shall mean the consolidated net worth as determined according to International Accounting Standards. It is further stipulated that any foreign bank company and financial institution wishing to set up a branch office in Bangladesh must have sufficient capital as per applicable Basel standards for the parent bank and financial institution and obtain a license from Bangladesh Bank (Central Bank of Bangladesh) for conducting banking activities and comply with the conditions mentioned in the said license.

A company can carry out the following activities through Branch Offices in Bangladesh:

1.???Acting as purchase or sales representative in Bangladesh on behalf of the parent company and also Conducting commercial activities in Bangladesh on behalf of the foreign commercial Bank.

2.???Technical or financial assistance between the parent company or any foreign company and Bangladeshi company providing assistance in matters relating to cooperation;

3.???Provision of professional or consultancy services or contractor/sub-contractor within the scope of the parent company's scope of work.

4.???Conducting such activities, including research, on behalf of the parent company;

5.?? Sales and after-sales services for proper marketing/distribution of products and/or services provided by the parent company providing;

6.?? Representing foreign airlines and shipping companies;

7.??To engage in import and export business subject to proper approval;

8.??Engaging in other commercial activities with the approval of the Authority/Inter-Ministerial Committee;

9.??The branch office concerned with the production of goods or services shall set up the industry in Bangladesh within 10 (ten) years of obtaining the permission of the office. Renewal of branch office approval after 10 (ten) years will not be considered.

It is mentionable that without the approval of the Inter-Ministerial Committee, a Branch Office cannot conduct any additional activities except the above-mentioned activities.

A company shall necessarily consider the following activities through Liaison and representative offices:

1.?????Able to maintain business coordination liaison between foreign head offices and local agents, suppliers/exporters/importers in Bangladesh through correspondence, personal and electronic communications;

2.??Collect, collate, analyze, and disseminate information in areas of work approved by the Authority/Inter-Ministerial Committee;

3.??The Liaison and Representative Office is able to?perform other functions with the approval of Authority/Inter-Ministerial Committee;?But provided that

(a) The functions of any representative and liaison office of a foreign bank shall be limited to the functions prescribed by Bangladesh Bank (Central Bank of Bangladesh);

(b) The Liaison and Representative Office shall not undertake any other activities in addition to the above-mentioned activities without the approval of the Inter-Ministerial Committee of the Authority.

?4. The Liaison and Representative Office shall not be directly involved in the sale and purchase of any goods or services within Bangladesh on its own behalf for profit. Also, these offices cannot participate in any value addition activities.

5.??Liaison and representative offices may not engage in any activities other than those specified in the office permission.

6.??Liaison and representative offices shall not derive any income from local sources;

7.??Establishment of Liaison and Representative Offices, operational expenses, salaries and allowances of local/foreign manpower and all other expenses are carried out through inward repatriation from the main office abroad through the banking channel.

8.??Liaison and Representative Offices shall not repatriate any money other than the unspent portion of foreign exchange brought from abroad.

It is important to know the conditions and requirements for establishing a Branch Office or Liaison Office in Bangladesh because it provides crucial information for foreign companies or organizations planning to expand their operations into the country. Understanding these conditions helps investors to prepare and meet the necessary criteria to obtain permission and operate legally in Bangladesh. Additionally, being aware of the scope of work and permitted activities ensure compliance with local regulations and avoids any legal issues during their business operations in the country. Overall, having this knowledge is essential for making informed decisions and the successful establishment of their presence in Bangladesh.

Reference:

3.?????BIDA guideline 2023

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