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Prepared By: A.B.M. Badrud Doulah

DOULAH & DOULAH Dhaka, Bangladesh

1. The Overview

Bangladesh had been a part of the greater India under the British colonial rule for about two hundred years. Formed in 1971 following the then East Pakistan's secession from West Pakistan, Bangladesh is surrounded almost entirely by India, save for its southeastern border with Myanmar. The country is situated on the confluence of the Ganges, Meghna and Jamuna rivers, which flow out into the Bay of Bengal from the mouths of the Ganges, a series of deltas along Bangladesh's coastline. Bangladesh is a moderate, democratic and homogeneous country. It is a constitutional republic with a multi party parliamentary democracy. Elections are held on the basis of universal suffrage. The President is the head of state elected by the members of the parliament for a five-year term. Executive power is exercised by the cabinet headed by the Prime Minister, who is the leader of the house in the parliament. The President appoints the Prime Minister and, on his / her recommendation, other ministers. He also appoints members of the judiciary. Bangladesh has a four-tier local government system. Following table presents the administrative units at different levels. Comprising of a very young population, Bangladesh is the ninth most densely populated country in the world with a modest growth rate of 1.48% annually. Over 70% of the population are estimated to be aged below 25 years and about 77% living in rural areas. Growth in the urban population (by birth and migration) over last decade (1991-2001) significantly increased by 38%. However, in rural areas the same is experienced at 10.42%. Bangladesh is in the process of a transition from a predominantly agrarian economy to an industrial and service economy. The private sector is playing an increasingly active role


in the economic life of the country, while the public sector concentrates more on the physical and social infrastructure. The country's main exports are readymade garments, jute, tea, seafood and leather products. Recently, though, it has received interest from international energy companies attracted by the existence of significant onshore and offshore gas reserves.


2. The Legal System

English common law forms the basis of Bangladesh's legal system, which, since 1971 has been updated in areas of company, banking and bankruptcy laws. As the country's capital, Dhaka is also its legal centre, and the vast majority of law firms are based here, except for a few small practices and branch offices in Chittagong. Bangladesh's highest legal forum is the Supreme Court, which is divided into high court and appellate divisions. The president appoints judges and the chief justice. Most of the commercials cases are initiated in the District Court Level.


3. The Enterprises

According to types of Establishments the options for establishing a legal entity in Bangladesh may be classified into two classes as follows:

The First option is to establish a new company, i.e. enterprise in Bangladesh

The Second option is to setup a representing legal entity in Bangladesh registered with Bangladesh Authority, for an enterprise that already stands established outside Bangladesh.

According to The Companies Act, 1994 (the Act), which consolidates Bangladeshi Law relating to enterprises, as amended from time to time, there are basically two types of enterprise that can be registered under the Companies Act of Bangladesh. The limited liability company (SRL) is commonly known as private limited company. The other type, the stock corporation (SA) is commonly referred to as public limited company. The classification of establishments as provided by the Act is as follows. The Act applies to all classes of enterprises i.e. companies, both public and private, including associations not trading for profit but registered under the Act, whether limited by shares or by guarantee or with or without share capital or unlimited.

A. Limited Companies: a. Company Limited by Shares i. Public Limited Company and ii. Private Limited Company


b. Company Limited by Guarantees. B. Unlimited Companies Unlimited companies and companies limited by guarantees may or may not have share capital.

3.1 Forming an Enterprise

To form any type of enterprise the incorporation or registration is done by the Registrar of Joint Stock Companies and Firms, Dhaka. In all cases. The promoters must register the Memorandum of Association with the Registrar of Joint Stock Companies and Firms in Bangladesh. The Memorandum of Association constitutes the basis for the existence of the company as a corporate body and determines the ambit of its power, inter alia. It is to be accompanied with the Articles of Association. In brief, the procedures may be outlined as follows:

Selection of a Company Name and verifying its availability Preparation & Filing of Memorandum of Association (MOA) & Articles of Association (AOA) Application for Registration. For Private Companies a declaration on Registration, notice of situation of registered office, consent of directors to act, list of persons consenting to be directors and particulars of directors, managers and managing agents are also to be filed. For Public limited companies further required is the agreement to take qualification share.

3.2 Memorandum of Association :

Memorandum of Association of the company state the name of the company, whether it is public limited or private limited and the location of the registered office at the


company. The memorandum should clearly spell out the main objectives, the authorized capital-division of this capital into shares of fixed amount and liability of its members. In brief it may be defined structurally to contain details as follows: The companys name, with the words Limited or Private Limited (in the case of a private company), at the end; The address where the registered office will be situated; The objects for which the company is formed; The nature of liability of members; The amount of authorized share capital divided into shares of a fixed amount; and The names of subscribers and the number of shares taken by each of them. The memorandum of the company is the charter or the constitution and no company can carry on any objectives not authorized by its Memorandum of Association.

3.3 Articles of Association:

The Articles of Association are the regulations governing the internal management of the affairs of the company and the conduct of its business.

3.4 Limited Liability Company

The minimum number of members in such limited liability company is two and the maximum is limited to 50 excluding the persons employed in the company. This number of members is excluding employees. A private company limited by shares must register its Articles of Association with the Registrar of Companies. Generally, the clauses of the articles regulate the internal management of the company. It provides for the appointment of directors, their duties and powers, for setting the rights of the holders of shares, stating


how these are to be allotted among the members, transfer of shares, increase and reduction of capital, and borrowing powers. It also provides, inter alia, for meetings of me mbers, for votes and the passing of resolutions of different kinds. This type of enterprise prohibits any invitation to the public to subscribe for the shares or debentures of the company and entitles to commence business from the date of its incorporation.

3.5 Stock Corporations

Public limited companies have wider membership and the number of shareholders is unlimited. A public limited company must have a minimum of seven members and three directors. A public company limited by shares has, however, the option of registering or not registering its articles. In the event of not having its own Articles of Association registered, the model regulations given in Schedule I, appended to the Act, will automatically apply. Companies must issue a prospectus for the purposes of inviting the public to subscribe for their shares; otherwise, the form of application for shares or debentures of a company cannot be issued. In case of non issuance of a prospectus, the public company cannot commence business or exercise borrowing powers unless a statement in lieu of a prospectus is filed with the Registrar and the directors have paid application and allotment money on shares taken or contracted to be taken by them. No allotment of share capital offered to the public can be made unless the minimum amount necessary to provide for certain specified matters has been subscribed and the sum payable in application for such shares has been received by the company.

3.6 Shareholders Meeting

Every company limited by shares is required to hold a statutory general meeting within a period of not less than one month and not more than six months from the day on which it is entitled to commence business. Every company is required to hold in each year, in addition to any other meeting or meetings, a general meeting as its annual general


meeting and not more than fifteen months shall elapse between the day of one annual general meeting of a company and that of the next. Before 60 days, from the date of the annual general meeting, a return containing prescribed particulars regarding:

The states of the companys affair; Proposed amount for reserve in balance sheet; Recommended dividend; Material changes on commitment; Nature of business; Reservation qualification and adverse remarks contained in the auditors report; and Its directors, managing directors, managers, and secretaries, past and present.

An annual return has also to be filed by companies not having a share capital. There are various other returns required to be filed by the companies with the Registrar of Companies.

The annual balance sheet and profit and loss account must be attached to every balance sheet laid before a company in an annual general meeting along with a report by its board of directors. The balance sheet along with the profit and loss account, auditors report, and any other document required to be annexed to the balance sheet must be sent to the members and debenture-holders other than holders of bearer debentures. The copies of the balance sheet, profit and loss account, auditors report and any other document required to be annexed to the balance sheet must be filed with the Registrar of Companies. Every company is required to have auditors appointed by the company in the general meeting.

3.7 Board of Directors

The management of the companies may be carried on by either the board of directors directly or through a managing director, or a general manager/chief executive officer. =9=

Managing Director means the director who by virtue of an agreement with the company or under a resolution passed by the company in a general meeting or by its board of directors or by virtue of its memorandum or Articles of Association is entrusted with substantial powers of management that would not be otherwise exercisable by him, and includes a director occupying the position of a managing director, by whatever name called. The managing director can exercise his powers only subject to superintendence, control, and direction by the board of directors. The power to perform administrative acts of a routine nature is not included within the substantial powers of management. The board of directors can, if the articles so authorize, appoint additional directors who hold office only up to the next annual general meeting of the company.

The powers of a company are exercised by its board of directors. The Act provides that the board will be entitled to exercise all such powers and to do all such acts and things as the company is authorized to do, except those which are specifically required by the Act or the Memorandum or the Articles of Association, to be done by the company in general meeting. The powers exercisable by the board relate to those exercisable in pursuant to resolutions taken at Board meetings. The important powers of the board can be exercised only at Board meetings regularly convened with due notice of the subject. These include:

Making of calls in respect of unpaid money on shares; Borrowing debentures or otherwise; and Investing of funds or making of loans.

A meeting of its board of directors shall be held at least once in every three and at least four such meetings shall be held in every year. There are certain powers of the company that can be exercised by the directors only at board meetings. Also, there are certain powers exercisable by the board of directors only with the consent of the company in a general meeting. The other powers of the company can be exercised by the board of directors, either at board meetings or by resolution passed by circulation. Such powers will, however, be subject to the restrictions, if any, laid down by the memorandum and Articles of Association.

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Also, if the board of directors feels the requirement, they may form a supervisory board as per the rules and regulations fixed in the general meeting , the functional capability and power of the board being stored documentarily as outlined by the Memorandum of Association and/or Articles of Association or the resolution of the annual meeting or by the board of the directors.

Companies already registered outside Bangladesh may also simply establish a place of business and / or a branch / liaison office in Bangladesh. In both cases such legal entities are to be registered with the Registrar of the Joint Stock Companies and Firms. The stepwise procedures involve:

Prescribed Application Form MOA and AOA of the principal company Certificate of incorporation of the principal company Name and nationality of the directors / promoters Board of Investments registration for foreign investment company Audited account for the last financial year Consent / permission from the Bangladesh Bank, the Central Bank of Bangladesh.

3.8 Mergers & Acquisition

Sections 12-14 of the Companies Act, 1994 contain the main section that deals with the reconstruction and amalgamation (acquisition & merger) of the companies. However, this section requires companies to make application to the court under Section 12, which empowers the court to sanction the compromise or arrangement as proposed by the companies.

Amalgamation is a state of things under which either two companies are so joined to form a third entity (merger) or one is absorbed into or blended with another (acquisition). Acquisition is effected by exchange of shares voluntarily or through court procedures by = 11 =

members of one company for shares in another company. Such acquisition may be carried out by agreement or by a take over bid by one of the companies for the shares of the other or where a company is prepared to be voluntarily wound up. In the case of a take over bid, if shares are held by a small number of parties, a take over may be effected by acquiring all the shares by agreement with its holders. Shares held by the public are acquired by purchase on the stock exchange or by means of a bid that offers to acquire shares of a company where shares are not closely held with a view of obtaining sufficient shares to obtain legal control of the company. Acquisition may be achieved easily where a scheme or contract involving the transfer of shares in a company to another company has been approved by the holders and the transferee company gives notice in the prescribed manner to any dissenting shareholders.

The acquisition procedure is quite straightforward in Bangladesh. At first, the directors, the creditors, or the liquidator in case of enterprises being wound up or the majority share holder of the enterprise do the preliminary work and draw out in outline the proposed arrangement. Also, if possible, they enter into some kind arrangement as a basis of further steps. A detailed petition is then to be filed before the court accompanied with all evidences. In exercising its discretion as per the Act, the court:

Shall have regard to the rights and interests of the members of the company as well as to the rights and interests of the creditors;

May if it thinks fit may adjourn the proceedings in order that an arrangement may be made to the satisfaction of the court for the purchase of the interest of dissenting members; and

May give such directions and make such orders as it may think expedient for facilitating or carrying into effect any such arrangements.

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The court may make an order confirming the proposed alteration either wholly or in part and on such terms and conditions as it thinks fit and may make such order as to costs as it thinks proper.

If the court allows for the proposed acquisition, a confirmation of alteration is to be certified by the Registrar of the Joint Stock Companies and Firms of Bangladesh. The proposed Memorandum of Association may be drafted afresh or the previous one being altered and the certified copy of the order are to be filed confirming the alteration within ninety days from the date of the order or within such time as may be extended by the court in the Office of the Registrar of Joint Stock Companies and Firms in Bangladesh. The Memorandum of Association is then registered by the Registrar who shall certify the registration and provide a certificate. The certificate shall be the conclusive evidence that all the requirement of the Act, with respect to the alteration and confirmation have been complied with. The new or altered Memorandum of Association then represents the memorandum of the acquired enterprise.

3.9 Winding Up
The winding up of a company may be in any of the following forms:

By the court Voluntary Subject to supervision of court

Among other circumstances, if the enterprise is unable to pay its debts, it may be wound up by the court. A company may be deemed unable to pay its debts if the company is unable to pay the debt to the creditor within three weeks of notice of demand or it is proved to the satisfaction of the court that the company is unable to pay its debts. A creditor or a group of creditors may apply to the court for the acquisition of the realty against their claims. An order for winding up of the company shall operate in favor of all the creditors and of all the contributors of the company. For the purpose of winding up, = 13 =

the court may fix an official receiver known as liquidator. On the making of a winding up order, the petitioner will file the order in the Office of the Registrar of the Joint Stock Companies and Firms.

After fixation of the liquidator the company being wound up is to file the statement of all of its assets, debts and liabilities, creditor details and debts due to the company, which will be verified then. On receiving the statements the liquidator will submit to the court within 160 days of the order a report comprising amount of cash, debt due, movable and immovable properties and unpaid calls. The official liquidator will then take into his custody all the properties. Also, there will be some formalities performed by the inspection committee. The liquidator has the power to sell or transfer the movable or immovable properties of the company by public auction or contract. Transfer of property after commencement of proceeding without the knowledge of the liquidator is void. The court also has the power to order for the acquisition of any movable or immovable property by the creditors and/or contributory against their claims as it deems fit.

An enterprise may be wound up voluntarily if the enterprise resolves by extra ordinary resolution to the effect that it cannot by any reason of its liabilities continue its business. The winding up after a meeting at the instance of the enterprise with the creditors at which the resolution of voluntarily winding up is proposed is known as creditors voluntary winding up. In such case, the creditors and the company may nominate a liquidator who will distribute the realty accordingly.

3.10 Insolvency & Reorganization

In case of an enterprise or its creditors apply for its insolvency before the Bankruptcy Court; the court on receiving such plaint appoints an interim receiver who will immediately take the possession of all the movable, immovable and secured properties of the enterprise. If the court is satisfied, then it may approve the insolvency petition and appoint an official receiver or itself acts as an official receiver to look after the interests

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of the creditors and contributors. If any secured creditor does not realize his security before the commencement of proceedings, his security will be taken over by the receiver. After the order of adjudication, the receiver will determine the secured creditors claims and satisfy the same at first. If the value of the security is enough to meet the creditors claim, then the receiver will satisfy the creditors claim by selling the security and the remaining part of the sale value will add to the estate. If the sale value of the security is not enough to meet the claim of the creditor, the receiver may on selling the security, pay the proceeds over to the creditor or deliver such property to the creditor. In all cases the receivers fee and the expense of the sale (where applies) will be deducted.

At any time before or after adjudication any debtor company may apply to the court to reorganize his debts stating the grounds. On hearing the company is to propose its plane for such reorganization of debts. If the court is satisfied it may approve such reorganization but at least two thirds in value of all the creditors must give consent to the plan or reorganization.

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4. Foreign Investment
All foreign investments in Bangladesh must be at first permitted by the Board of Investment. The Board of Investment (BOI) was established by the Investment Board Act of 1989 to promote and facilitate investment in the private sector both from domestic and overseas sources with a view to contribute to the socio-economic development of Bangladesh. It is headed by the Prime Minister and is a part of the Prime Minister's Office. Major Functions of BOI include:

Providing necessary facilities and assistance in the establishment of industries. Implementing investment related GOB policies. Preparing investment schedule. Registering private sector industrial projects; and identifying competitive investment sectors and facilitating investment by providing information and services.

The BOI also includes a Utility Service Cell that offers pre-investment counseling, facilitation of utility connections, and assistance with import clearance and warehousing licenses.

The foreign investment options in Bangladesh are as follows: A. Joint venture/100% foreign investment proposals in the private sector No prior approval or no objection certificate is required for setting up of a joint venture / 100% foreign direct investment. To avail of facilities and the institutional support services provided by the govt. entrepreneur/investors are advised to apply for registration to BOI in a simple prescribed form.

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B. Self financed local investment proposals including industries sanctioned/ financed by financial institutions or commercial banks. The entrepreneurs of such projects are to fill up a simple prescribed application form and submit to BOI for registration. After a first hand scrutiny of the information, BOI issues registration letter. C. Permission for setting up joint venture industrial units with the public sector corporations

Any individual entrepreneur either local or foreign can set up an industry with public sector corporation. Such joint venture is required to be registered with the BOI if the private sectors contribution is more than 50% of the project cost and in such case it is treated as private sector project. For any public sector which makes contribution out of their own fund needs approval of the concerned ministry. If the contribution of the corporation is 50% or above, it is treated as a public sector project. The public sector project is processed by the concerned ministry for approval of the Planning Commission.

4.1 Investment Incentives

The democratic government is highly keen to stimulate the economy and transform a poverty-stricken economy to NIE within short time. Government has liberalized the industrial and investment policies in recent years by reducing bureaucratic control over private investment and opening up many areas. Major incentives are as follows: Tax Exemptions : Generally 5 to 7 years. However, for power generation exemption is allowed for 15 years. Duty : No import duty for export oriented industry. For other industry it is @ 5% ad valorem. Tax Law : i. Double taxation can be avoided in case of foreign investors on the basis of bilateral agreements. ii. Exemption of income tax upto 3 years for the

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expatriate employees in industries specified in the relevant schedule of Income Tax ordinance. Remittance : Facilities for full repatriation of invested capital, profit and divided. Exit : An investor can wind up on investment either through a decision of the AGM or EGM. Once a foreign investor completes the formalities to exit the country, he or she can repatriate the sales proceeds after securing proper authorization from the Central Bank. Ownership : Foreign investor can set up ventures either wholly owned on in joint collaboration with local partner.

4.2 Incentive Details:

A. Tax Holiday Tax holiday facilities will be available for 5 or 7 years depending on location of the industrial enterprise. Dhaka and Chittagong Divisions (excluding 3 hill tract districts of Chittagong Division) 5 years

Khulna, Sylhet, Barisal and Rajshahi Divisions And 3 Chittagong hill tract districts 7 years

Tax holiday facilities will be provided in accordance with the existing laws. The period of tax holiday will be calculated from the month of commencement of commercial production. Tax holiday certificate will be issued by NBR for the total period within 90 days of submission of application. This facility can be availed of by industries set up within June 30, 2000 ADb. B. Accelerated Depreciation Industrial undertakings not enjoying tax holiday will enjoy accelerated depreciation allowance. Such allowance is available at the rate of 100 per cent of the cost of the

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machinery or plant if the industrial undertaking is set up in the areas falling within the cities of Dhaka, Narayangonj, Chittagong and Khulna and areas within a radius of 10 miles from the municipal limits of those cities. If the industrial undertaking is setup elsewhere in the country, accelerated depreciation is allowed at the rate of 80 per cent in the first year and 20 per cent in the second year. C. Concessionary Duty on Imported Capital Machinery Import duty, at the rate of 5% ad valorem, is payable on capital machinery and spares imported for initial installation or BMR/BMRE of the existing industries. The value of spare parts should not, however, exceed 10% of the total C & F value of the machinery. For 100% export oriented industries, no import duty is charged in case of capital machinery and spares. However, import duty @ 5% is secured in the form of bank guarantee or an indemnity bond will be returned after installation of the machinery. Value Added Tax (VAT) is not payable for imported capital machinery and spares. D. Rationalization of Import Duty Duties and taxes on import of goods which are produced locally will be higher than those applicable to import of raw materials for producing such goods. E. Incentives to Non-Resident Bangladeshis (NRBs) Investment of NRBs will be treated at par with FDI. Special incentives are provided to encourage. NRBs for investment in the country. NRBs will enjoy facilities similar to those of foreign investors. Moreover, they can buy newly issued shares/ debentures of Bangladeshi companies. A quota of 10% has been fixed for NRBs in primary public shares. Furthermore, they can maintain foreign currency deposits in the Non-resident Foreign Currency Deposit (NFCD) account. F. Other Incentives

Tax exemption on royalties, technical know-how fees received by any foreign collaborator, firm, company and expert.

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Tax exemption on the interest on foreign loans under certain conditions. Avoidance of double taxation in case of foreign investors on the basis of bilateral agreements.

Exemption of income tax up to 3 years for the foreign technicians employed in industries specified in the relevant schedule of income tax ordinance.

Tax exemption on income of the private sector power generation company for 15 years from the date of commercial production.

Facilities for full repatriation of invested capital, profit & dividend. 6 months multiple entry visa for the prospective new investors. Re-investment of repatriable dividend treated as new investment. Citizenship by investing a minimum of US$ 5,00,000 or by transferring US$ 10,00,000 to any recognized financial institution (non-repatriable).

Permanent residentship by investing a minimum of US$ 75,000 (non-repatriable). Tax exemption on capital gains from the transfer of shares of public limited companies listed with a stock exchange.

Special facilities and venture capital support will be provided to export-oriented industries under "Thrust sectors"

There will be no discrimination in case of duties and taxes for the same type of industries set up by foreign and local investors and in the public and private sectors.

G. Incentives to Export-Oriented and Export-Linkage Industries Export-oriented industrialization is one of the major objectives of the Industrial Policy 1999. Export-oriented industries will be given priority and public policy support will be ensured in this respect. An industry exporting at least 80% of its manufactured goods or an industry contributing at least 80% of its products as an input to finished exportables, and similarly, a business entity exporting at least 80% of services including information technology related products will be considered as an export-oriented industry. To make

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investment in 100 percent export-oriented industries attractive, the following incentives and facilities will be provided : a. Duty free import of capital machinery and spare parts up to 10 percent of the value of such capital machinery will continue. b. Existing facilities for Bonded Warehouse and back-to-back Letter of Credit will continue. c. The system for duty drawback will be further simplified and to this end, duty drawback will be fixed at a flat rate on exportable and potentially exportable goods. Exporter will receive duty drawback at a flat rate directly from the relevant commercial banks. d. The arrangement for providing loans up to 90 percent of the value against irrevocable and confirmed Letter of Credit/Sales Agreement will continue. e. To ensure backward linkage, incentives will be extended to the "deemed exporters" supplying indigenous raw materials to export-oriented industries. Export-oriented industries including export-oriented RMG industries, using indigenous raw materials will be given facilities and benefits at prescribed rates. f. The export-oriented industr4ies, further to the provisions of Bangladesh Bank foreign exchange regulations, will be entitled to receive additional foreign exchange, on case to case basis, for publicity campaign, opening overseas offices and participating in international trade fairs. g. The entire export earning from handicrafts and cottage industries will be exempted from income tax. For all other industries, income tax rebate on export earning will be given at 50 percent. h. The facility for importing raw materials, which are included in the banned/restricted list, but required in the manufacture of exportable commodities, will continue. i. The import of specified quantities of duty-free samples for manufacturing exportable products will be allowed consistent with the prevailing relevant government policy.

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j. The local products supplied to local industries or projects against foreign exchange L/C will be treated as indirect exports and be entitled to all export facilities. k. The Export Credit Guarantee Scheme will be further expanded and strengthened. l. 10 percent products of the enterprises, located in both public and private EPZs will be allowed to be exported to domestic tariff area against foreign currency L/C on payment of applicable duties and taxes. m. 100% percent export-oriented industry outside EPZ will be allowed to sell 20% percent of their products in the domestic market on payment of applicable duties and taxes. n. The Export-oriented industries which are identified by the government as "Thrust Sector" will be provided special facilities and venture capital support. Numerous other incentives relating to taxation, immigration and capital transfer apply. Royalties and technical know-how fees received by any foreign collaborator, firm, company or expert are tax exempt. The interest on foreign loans is tax exempt under certain conditions. On the basis of bilateral agreements, double taxation in case of foreign Supplement investors can be avoided. Foreign technicians employed in industries specified in the relevant schedule of income tax ordinance can be exempt from income tax up to three years. Private sector power generation companies may be tax exempt on income for 15 years from the date of commercial production. Capital gains from the transfer of shares of public limited companies listed with a stock exchange are tax exempt. There will be no discrimination in case of duties and taxes for the same type of industries set up by foreign and local investors and in the public and private sectors.

Facilities for full repatriation of invested capital, profit, and dividend. Re-investment of repatriable dividends is treated as new investment. Special facilities and venture capital support will be provided to export-oriented industries under thrust sectors Prospective new investors are granted six months multiple entry visas. Citizenship can be obtained by investing a minimum of US $500,000 or by transferring US $1,000,000 to any recognized

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financial institution (non-repatriable). Permanent residency may be gained by investing a minimum of US $75,000 (non-repatriable).

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5. Required Permits & Procedures

A. Registration with Factories Act: Any manufacturing company employing ten or more workers is required to be registered under the Factories Act, 1965 with the office of the Chief Inspector of Factories and Establishment. The act is primarily to regulate working conditions and to ensure safety in the factory.

B. Obtaining Work Permit : Work permit for foreign nationals is a pre-requisite for employment in Bangladesh. Private sector industrial enterprises desiring to employ foreign nationals are required to apply in advance in the prescribed from of BOI. For expatriate employment the guidelines are as follows: 1. National of the countries recognized by Bangladesh are considered for employment. 2. Employment of expatriate personnel be considered only in industrial establishments which are sanctioned / registered by the appropriate authority. 3. Employment of foreign nationals is normally considered for the job for which local experts / technicians are not available and persons below 18 years of age are not eligible for employment. 4. Decision of the Board of Directors of the concerned company for new employment/ extension is to be furnished. 5. Number of foreign employees should not exceed 5% of the total employees including top management personnel. 6. Initially employment of any foreign national is considered for a term of 2 years which may be extended on the basis of merit of the case. = 24 =

7. Necessary security clearance has to be obtained from the Ministry of Home Affairs

6. Registration/Approval for Foreign Loan, Suppliers' Credit, PAYE Scheme etc.:

Entrepreneurs in the private industrial sector arranging foreign credit in the form of loan, suppliers' credit, PAYE scheme etc. falling within the following guide-lines are not required to obtain prior approval from BOI for contraction such credit:

The effective rate of interest should not exceed LIBOR+4% (effective interest is the sum of the stated annual rate of interest and the annualized fees such as commitment fee, syndication fee, front-end fee, project appraisal fee etc.)

The down payment, if any, in case of suppliers' credit should not exceed 10% of the credit amount.

Repayment period should not be less than 7 years.

A copy of the foreign loan agreement signed by both parties should be submitted to BOI for registration.Period approval of BOI us required for the proposals which do not fall within the aforesaid guide-lines.

7. Obtaining Industrial Plot : Entrepreneurs requiring industrial plot for setting up of industry in any industrial areas / estates apart form BEPZA and BSCIC, may approach BOI mentioning the size of plot required by them along with copies of sanction / registration letter and industrial layout plan for justifying actual requirement. After receiving the application BOI provides assistance to get the industrial plot. Most of the industrial areas/ estates are owned / controlled by city development authorities in three divisional head quarters., RAJUK in Dhaka, CDA in Chittagong and

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KDA in Khulna. Besides these, there are a few industrial estates owned and controlled by some other government agencies namely, (a) Public Works Department and (b) Housing and Settlement Directorate. BOI also recommends for acquisition of land to the concerned if required to by the industrial units. In such cases the entrepreneurs are required to submit relevant papers and information in connection with the land to be acquired by the Deputy Commissioners (D.C.) concerned.

8. Environmental Legislation :

Under the Environment Conservation Act 1995, all industrial project shall obtain environmental clearance from the Department of Environment. The main criteria for obtaining clearance are set out in the Environment Conservation Rules 1997 which was established under the Act. Different levels of assessment are required depending on the particular industry concerned.

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6. Currency Regulations & Customs

6.1 Currency Regulation

Exchange Control is regulated by Foreign Exchange Regulation Act, 1947 and covers payments and dealings in foreign exchange and securities and import and export of currency and bullion. No person except an authorized dealer may deal in foreign exchange without previous general or special permission of Bangladesh Bank. This includes buying, borrowing, selling lending, or exchanging any foreign exchange with any person who is not an authorized dealer. No exchange is permitted except at rates authorized by Bangladesh Bank. Remittance of money must be dealt with proper banking channel. No person should operate any banking account in other countries to receive remittance relating to any service in Bangladesh. Restrictions exist on import and export of currency, gold, or silver jewellery or precious stones without prior approval.

6.2 Capital and Profit Transfer

Foreign capital invested in Bangladesh for industrial projects with the approval of the government is allowed to be repatriated from Bangladesh, along with capital appreciation, if any, provided approval is first obtained from the Bangladesh Bank Dividends and profits are now allowed to be remitted with much lesser controls. Prior approval of the Bangladesh Bank is required before profits from the foreign subsidiaries can be remitted to the parent company. Taxes must first be paid. Profits retained are considered re-invested Applications in this regard are to be made to the Bangladesh Bank. Applications for remittance of profits should be made to the Bangladesh Bank through the applicants bank by letter.

Repatriation of investments made in Bangladesh with the approval of the government of Bangladesh/Bangladesh Bank is permissible (except where investment was permitted on a specific condition that it will not be eligible for repatriation), provided the disinvestment has also been made with the approval. Actual remittances will be permitted = 27 =

subject to fulfillment of such conditions as to quantum and installments of repatriation, etc., if any, as may be applicable from time to time.

Foreign nationals temporarily resident in Bangladesh are permitted to remit to their native countries, their current assets such as savings from salary, dividend etc. with prior permission from Bangladesh Bank. There are now no restrictions on the receipt in Bangladesh of remittance through proper banking channels, from any foreign country. There are also no restrictions on the import of foreign-currency checks. All foreign currency drafts may be converted freely through authorized dealers, with travelers checks and foreign currency notes/coins may be converted into taka through moneychangers who are specially authorized by Bangladesh Bank to undertake such transactions.

No prior permission of Board of Investments (BOI) is required for entering into agreements for remitting fees for the purpose of royalty, technical know-how and technical assistance if the total fees and other expenses connected with technology transfer (service fee, marketing commission etc.) are within the following prescribed limits. For new projects, such fees and other expenses should not exceed an aggregate limit of 6 per cent of the commercial value of imported machinery.

Recurrent annual fees for royalties and other expenses such as fees for technical knowhow, technical assistance, operational services, marketing of products etc. should not exceed an aggregate limit of 6 per cent of the previous years sales of the firms declared in the tax return.

Once the technical transfer agreements falling within the above limits are signed, these are required to be furnished to BOI for registration.

Proposals that are covered under the prescribed limits will require prior approval of BOI for which application must be submitted along with necessary documents and copy of the relevant draft agreement.

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6.3 Customs Regulation

Customs duty has a vital role to play in the economy of Bangladesh as the duty is collected by the country on goods imported or exported out and, as such it is a very significant source of revenue. In Bangladesh The Customs Act, 1969 governs the customs duty, Import duty covers the basic duty which is levied at the preferential rate in case of importing the commodities. Government has power from time to time by notification to prohibit or restrict bringing or taking by air, sea or land good of any specified description. Contravention of this would make goods liable or detention and confiscation by the customs authorities. The Government has power to exempt the levy of Customs duty on specified goods. While exercising that power the Government has to make a notification or pass a special order and that Notification is to be published in the Official Gazette. The Government can withdraw the Notification in the interest of public. The Law provides for levying of customs duties at rates prescribed and passed annually or under any law for time being in force on goods imported into or exported from Bangladesh; goods brought from any foreign country to any customs station and without payment of duty there transshipped or transported for or hence carried to and imported at, any other custom station and goods brought in bond from one customs station to another. Most of the customs duties are ad-valorem. Where duty is assessed on tariff value as stated in Bangladesh Customs Tariff, the Government has power to fix tariff values for goods. If there is any kind of deterioration or defect in the goods, the proportionate abatement in value is allowable. To determine the invoice price including ocean freight and insurance landing charges are also to be included. A certificate from an internationally reputed inspection and certification agency is necessary if any second hand machinery is imported. There has been a lot of alteration in exchange rates, rates of duty and tariff value and they keep on changing in short span of time. Law provides that the rates as in force on the date

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of presentation of the bill of entry for home consumption will be applicable. If imported goods are lost or destroyed at any time before clearance for home consumption, the remission on duty will be available but if there is any kind of pilferage, no remission in duty will be made. The owner of the goods for home consumption has always the opportunity to relinquish the title of the goods before getting the goods cleared. The Examiners of Customs and the Appraisers conduct examination of goods, their classification, the valuation, checking from import license point of view and assessment of duty. The work is divided for assessment into many groups according to the commodity groups. The Customs officer can follow two procedures for examination of the goods. Firstly, he can get the goods assessed himself before completing assessment and secondly, assessing the duty on the basis of records, leaving the examination to be done at the time of their clearance after payment of duty. When the goods are sought to be cleared on importation of goods, the documents which are to be submitted are Bill of Entry, Invoice and Packing List, Import License where necessary, Certificate of Country of Origin where preferential rate is claimed, Insurance Memo or Policy and Bill of Lading or Delivery Order. The documents necessary to be submitted in exporting the goods are Shipping Bill, Invoice and Packing List, Export License or Quota Certificate where necessary, Export Inspection Agency's Certificate where necessary, necessary Forms of Central Excise. Where some goods are imported and the prices have gone down, the importers are advised to keep catalogue regarding composition and functions of the goods. If the importer has paid short or excess of the custom duty, there is the provision to demand if the payment is short and to refund if the payment is in excess. If the importer is not in a position to pay the full custom duty or he does not want to use the full stock, he can enter into bond for warehousing of goods. There are warehouses being run by Warehousing Corporation. There are some provisions also where permission for the private warehouse on certain grounds is granted to the importer to keep his goods. If the person is aggrieved by the custom authorities, he has the opportunity to file an

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appeal to the Commissioner of Customs (Appeals). A second appeal lies to the Appellate Tribunal. If the Commissioner or an officer of a higher rank has passed an order, then the appeal lies direct to the Tribunal. The final appeal lies to the Supreme Court. If question on the rate of duty or value of goods is to be determined, it can be referred to the High Court also. If any mistake is committed, the Tribunal has the power to rectify the mistake apparent from the record. Whoever makes a statement or produces any kind of document in which there is false representation regarding the transaction of business relating to customs, he shall be punishable with imprisonment or fine or both. If any person obstructs the custom officer in his legal proceedings he shall be punishable with imprisonment or fine or both. If a person makes preparation to export any goods in contravention of the provisions of the Customs Act, he shall be punishable with imprisonment or with fine or both. In addition to the departmental action, the court also interferes in the custom cases of contraventions. The law regarding the Customs Act is very strict and punishments are quite severe.

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7. Taxation
Tax is chargeable under provisions of the Income Tax Ordinance, 1984 read with the Finance Acts. For the purpose of the Act, tax is to be charged on the income accrued or earned during the given previous year. For this purpose, the previous year is taken as the income year, while the Assessment year which follows the previous year is the financial year. The tax year known as assessment year runs from 1 July to 30 June. Every year the Finance Act amends the Income Tax Ordinance in certain points and fixes various tax rates. For purpose of charging tax and computation of total income, all income is classified as income from business or profession, salaries, interest on securities, income from residential property, capital gains and income from other sources.

Any income from business and profession of a Bangladeshi person is taxable when it accrues or is received in Bangladesh. If any income accrues or arises from any business connection in Bangladesh, it is deemed to arise in Bangladesh. Business income applies to all income derived commercial and industrial activities as well as for exercise of profession. The computation of the business income is done according to the expenditure that is not of personal or capital in nature, incurred wholly and exclusively for business purpose is allowable as expenditure. The Act also allows certain incentives, deductions, allowances and relates to various industrial or trading activities by way of depreciations, deduction of expenditure on scientific research on acquisition of patent rights, copyrights, know-how, etc. Expenditure on programs of conservation of natural resources, rent, rates, taxes, repairs, insurance, bonus, interest, debts, contribution to provident fund, gratuity fund, superannuation fund, entertainment, advertisement, traveling, etc. enjoy full deduction. Deduction is allowed to the adjusted income in respect of Head Office expenses. Similarly, losses may be carried forward and set off against the income.

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Corporate tax rate for industrial companies whose shares are publicly traded is 35% and the rate of whose shares are not publicly traded is 40%. Tax rate on income of all other companies including banks, financial institutions, insurance companies and local authorities is 40%. Companies enjoying tax holiday are required to invest 30% of their exempted income within two years from the end of the tax exemption period in the said undertaking or in new industrial undertaking or in stocks and shares of a public company or in government bonds or securities. Returns fields by the publics limited companies shall be accepted if it is accompanied by audited accounts and certified by a chartered accountant as to the correctness of the total income of the assessee. Salary received by or due to a foreign technician under contract of service approved by the National NBR is fully exempted from paying tax (subject to prescribed conditions and limitations) for a period of 3 years from the date of his arrival in Bangladesh. Expenditure incurred by an employer in respect of remuneration of the foreign technician is fully exempted from income tax( subject to the stipulated conditions). Expenditure incurred as remuneration payable to a foreign technician by a Bangladesh firm carrying on the business of consulting and engineering is fully exempted from tax (subject to prescribed conditions and limitations).

The income of the foreign collaborator shall be liable to tax if income is received or deemed to be received in Bangladesh. Any remuneration received in Bangladesh for the work done by an individual is taxable. The term 'remuneration' is very wide being inclusive of salaries and wages, pension, fees, commissions, profits in lieu of or in addition to salary, advance salary and perquisites and taxable payments include all allowances, deferred compensation and taxable equalization. The individual tax rate is as follows:

Personal Income On the first BDT 100,000 of total income

Tax Rate Nil

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On the next BDT 50,000 of total income On the next BDT 150,000 of total income On the balance of total income

10% 18% 25%

Capital gain tax deals with computation of income from capital gains. In the case of nonresidents, capital gains arising from transfer of shares and debentures are computed in the original currency of acquisition so as to insure that no tax is payable merely due to reduction in the value of the Bangladesh Taka. No capital gains tax is payable on transfer of shares in an Bangladeshi company by one non-resident to another, provided that prior consent has been obtained from the Board of Investment. It has the same taxation rate as for individual income tax and corporate tax for individuals and enterprises respectively.

Value Added Tax (VAT), previously known as sales tax, is a single point sales tax at different rates fixed by the government and is levied on almost all goods imported into Bangladesh or produced or manufactured in Bangladesh. Lately it has been also extended to various professions too.

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8. Labor Regulations
Bangladesh offers an abundant supply of disciplined, easyly trainable and low-cost work force suitable for any labor-intensive industry. Of late, there is an increasing supply of professionals, technologists and other middle and low level skilled workers. They receive technical training from universities, college, technical training centers, polytechnic institutions etc. The expenditure incurred by an employer to train his employee is exempted from income tax.

A. Employment Conditions: The minimum age for workers in Bangladesh is 16 years in factories and establishments. Contracts are made in the form of a letter of offer. Workers may also be engaged on verbal agreements. In government organizations and in some private organizations as well, a probation period exists for skilled or semi-skilled workers varying between three moth's to one year and during this period either party may serve one month's notice for termination from or giving up to the job. In the private sector, the dignity of labor is ensured in accordance with the principles enunciated in the ILO convention and recommendations.

B. Labor Laws: In Bangladesh 47 labor laws are now in operation. These relate to (a) wages and employment, (b) trade union & industrial disputes, (c) working environment and (d) labor administration and related matters. The main labor laws are:

Workmen's Compensation Act, 1923, Payment of Wages Act, 1936

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Maternity Benefit Act, 1936 Employment of Labor (Standing Orders) Act, 1965 Shops & Establishments Act, 1965 Factories Act, 1965 Industrial Relations Ordinance, 1969

C. Settlement of Labor Disputes: Contract or agreement is usually made between the management and the Collective Bargaining Agent (CBA) on settlement of industrial disputes as per provisions of Industrial Relations Ordinance, 1969. In case a bipartite negotiation fails, conciliation machinery of the government is requested by the aggrieved party to intervene and the conciliation process is undertaken. If succeeds agreement is signed between the parties and the Conciliation Officer becomes a witness. If it fails, the party raising the dispute, may go for strike or lockout as the case may be. The government may, however, prohibit the same after one month in the interest of the public. In the essential services like, (a) electricity, gas, oil & water supply etc. (b) hospital & ambulance service, (c) fire brigade, (d) railway & Bangladesh Biman and (e) ports etc., strike is prohibited.

D. Wages and Fringe Benefits: In the public sector, wages and fringe benefits of the workers are determined by the government on the recommendation of the National Wages Commission established from time to time. Such commissions were appointed in 1973,1977,1984, 1989 & 1992. Wages & fringe benefits declared by the government in 1977 having 20 grades of wages.The public sector employees are, however, covered by the Pay Commission declared by the government from time to time.

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In the private sector, the wages & fringes benefits of the workers and employees are determined through collective bargaining process. Sometimes private industries follow the public sector wages & salary structure for their workers and employees respectively.

E. Leave & Holidays: Leave & holidays of the workers & employees are regulated by the Factories Act, 1965 and shops Establishment Act, 1965.

F. Social Security: Workmen Compensation, Maternity Benefit (Tea Estate) Act, 1950, Maternity Benefit Act, 1939, Employment of Labor (standing orders) Act, 1965 etc. deal with provident fund and gratuity.

G. Labor Union: Industrial Relations Ordinance, 1969 deals with trade union in Bangladesh. In any industrial and commercial establishment, a trade union may be formed with 30% of the total number of workers employed. If there is more than one union in any establishment, Collective Bargaining Agent is determined by the Registrar of Trade Union through sector ballot for a term of two years. Only the Collective Bargaining Agent is authorized to raise industrial disputes and negotiate with the management. The Director of Labor of the government acts as the Registrar of Trade Union in Bangladesh. Till December 1996; 4955 trade unions (worker's union - 4104 & employers association- 851) exits in Bangladesh having 17, 30, 927 members. Industrial Relations Ordinance, 1969 provides that any worker or employer/ has the right to form a union/association without previous authorization. But such a union/association can not function as a trade union without being registered under the law.

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H. Working Hours: Workers in the public or private sector remain at their job for eight and a half hours daily (including half an hour for meal or rest) with Friday as weekly holiday marking 48 working hours a week. Work in excess of these, is paid as overtime. The rate of overtime is 2 hours pay for 1-hour job.

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9. Intellectual Property
In Bangladesh Intellectual Property laws comprise Trade Mark, Patent, Copyright, and Design. The protection of intellectual property is very much significant for doing business in Bangladesh or for technology transfer and use of Trade Marks, Patents and Copyright in Bangladesh.

9.1 Trade Marks

In Bangladesh the law relating to Trade mark is Trade Marks Act, 1940 which confer protection to the user of Trade Mark on his goods and to prescribe conditions for acquisition of trade mark. Brand, heading, label, ticket, name, signature, word, letter or numeral separately or in any combination thereof may be registered as a Trade Mark in Bangladesh. The Trade Mark Application praying for the registration of the mark as the applicants Trade Mark is to be filed with the Registrar of The Trade Marks Registry. The application is to be made in a prescribed form as given in the Act with the information regarding to the name, address and country of incorporation/nationality of the applicant; Class and description of the goods and the exact date since when the trade mark is being used in Bangladesh. An application can cover the goods of a single class only and Bangladesh follows the international classification of goods. After the application is processed and examined by the Trade Mark Authority provides that if there is no objection from the Examiner, it is to be advertised in the Trade Mark Journal issued by the Trade Mark Registry for inviting oppositions. If no opposition is

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filed within a period of four months from the date of advertisement, the Registrar of Trade Marks may register the Trade Mark. The registration of a Trade Mark is valid for a period of seven years which may be then renewed for fifteen years. When the registered Trade Mark is used by a person who is not so entitled, it constitutes infringement. The relief which the Court may grant includes injunction and other damages or an account of profit together with or without an order for delivery of the infringed labels and marks for destruction or erasure. The expression "passing off" is not defined in the Trade Mark Act, 1940. Nevertheless, the general principle is that no man is entitled to represent his goods as being the goods of another man. It is an actionable wrong for any person to pass off his goods as and for the goods of another person. Both civil and criminal remedies are available for such infringement, counterfeiting and passing off.

9.2 Patent & Designs

Patent right is a form of industrial property. The owner can sell the whole or part of his property. These rights could be licensed for commercial purposes. Patent Law is governed by the Patents & Designs Act, 1911. An application for patent for invention can be made by any person claiming to be the true and first inventor; any person being the assignee of the person claiming to be the true and first inventor in respect of the right to make such application. Where the application is made by virtue of an assignment of the right to apply for a patent for the invention, there shall be furnished with the application or within three months from filing the application, proof of the right to make the application; or by the legal representative of any deceased person who immediately before his death was entitled to make such application. Every application for a patent shall be for one invention only and shall be made in the prescribed form and filed in the Patent Office. Every patent application must be accompanied by complete specifications. The specifications shall be filed in triplicate. The specification shall contain an introductory paragraph to the invention followed by a

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statement of prior art if known to the applicant, and then drawbacks of the present state of art succeeded by the objects of the present invention. Thereafter, the statement of invention followed by a detailed description of invention with reference to the drawings and lastly ending with claims. The principal claim shall define the essential novel features of the invention and be in one single continued sentence. Optional features may be made the subject matter of subordinate claims. The drawings shall be filed in triplicate and the original shall be on tracing cloth, or transparent or semi-transparent sheet. Application, where accompanied by complete specifications will be examined and objections on examination are communicated to the applicant for carrying out amendments and to re-file the documents for re-examination, if necessary. After all objections are complied with, the Controller of Patent will accept the specifications and advertise such acceptance in the Official Gazette and keep it open for public inspection If there is no opposition or the opposition proceeding is finally decided in favor of the applicant, a patent is sealed upon the request from the applicant in the prescribed manner. Patent rights are granted to the patentee by the Controller of Patents, Patents & Designs Office. To maintain a patent in force, renewal fees are to be paid from the beginning of the fourth year from the date of patent.

9.3 Copyrights

The Copyright Act, 2000 confers on the owner of the Copyright exclusive right to multiply copies of his work for commercial exploitation. It also grants the negative right to refrain others from illegally multiplying the copies of his work. The Copyright protection exists in published as well as, unpublished works. The works in which copyright subsists are literary, dramatic, musical, artistic, cinematography film, records and computer programmes. Copyright law also extends protection to works of art intended for quasi commercial purposes, i.e., artistic design of cartoons, catalogue lists, drawings, monograms, advertisement drawings, computer software and painting produced on cards. Computer programmes are entitled to protection under the present

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law. Computer software comprises of programme manuals, punched cards, magnetic tapes, discs and papers, etc., which are needed for the operation of computers. The author is recognized as the first owner of the copyright except in the case of commissioned works done for valuable consideration during the course of employment either under a contract of service or of apprenticeship. The duration of copyright in any unpublished work is perpetual. Copyright protection in published work is for the life of the author and continues for 60 years after his death. Copyright may be assigned either wholly or partially by the owner of the work but no assignment is valid unless it is in writing signed by the assignor. The owner of the copyright can also grant license for use of his work on agreed terms and conditions. Any copyrights may be registered with the Copyright Office in the prescribed manner. The Copyright Act provides for civil and criminal remedy for violation of copyright laws. Bangladesh is signatory to two international copyright conventions, viz. The Berne Convention and the Universal Copyright Convention. By virtue of the provisions contained in these two multilateral Conventions, the works of Bangladesh nationals are entitled to copyright protection in all the countries which are signatory of these Conventions. Foreign authors from the member countries are entitled to similar copyright protection in Bangladesh.

9.4 International Treaties

Further, Bangladesh is a party to the Convention establishing the World Intellectual Property Organization (WIPO) on 1st January, 1987. In addition, Bangladesh is also a party to the The Paris Convention for the Protection of Industrial Property of 20th March, 1883. Moreover, Bangladesh is a party to the General Agreement on Tariffs and Trade, 1994 ( GATT ) which includes Trade - Related Aspects of Intellectual Property Rights ( TRIPS ) and, as such, makes her a member of the World Trade Organization ( WTO ) family.

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By virtue of the above international treaties any intellectual property registered in any of the convention country is to be treated as registered in the convention union and, as such, in Bangladesh and subject to protection. Also as to the provision stated in the said conventions Trade Name of entrepreneurs from any of the Convention country enjoys exclusive protection in the union i.e. the Convention countries and may not require registration. The Government of Bangladesh maintains offices of the Patent & Trade Mark Directorate in Dhaka, and the Copyright Office in Dhaka at present. All the courts of District Judge in each district and the Magistrates do take cases for judicial enforcement of various existing Intellectual Property laws of Bangladesh. The Supreme Court and the several courts of the High Court Division of the Supreme Court of Bangladesh hear the Intellectual Property appeal cases.

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