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Expert Insight Into

JANUARY 2015

FOREIGN INVESTMENT
Masud Khan
T/F: +880 2 8814311 | E: masud@legalcirclebd.com | W: www.legalcirclebd.com

This month as part of our Expert Insight feature, Lawyer Monthly

takes a look at foreign investment, discussing the latest legal,
regulatory and business challenges facing companies and
individuals in an ever-evolving landscape. To this end, we speak
to Masud Khan, an international corporate lawyer with over 17
years experience in international corporate and commercial
law from The Legal Circle in Bangladesh. The Legal Circle is a
corporate law chambers comprising of barristers, advocates and
legal consultants whose M&A practice has been ranked in the
Chambers and Partners Asia Guide from 2012 onwards
As an expert in corporate and commercial law, what
would you say are the biggest draws for investors
when looking to Bangladesh as a place to do
business?
Bangladesh has averaged an impressive 6% GDP
growth rate for the past 10 years (with 6.4% growth
rate estimated by the Asian Development Bank for
2015). Furthermore, Goldman Sachs has placed
Bangladesh in its Next Eleven list of countries
that have the potential to become the worlds
largest economies in the 21st century. Bangladesh
is currently one of the top exporters of Readymade
garments (RMG) to the USA and Europe. It may be
noted that since the Rana Factory collapse tragedy
of last year, the RMG sector has made significant
leaps in improving compliance and worker relations/
working conditions. Fisheries (shrimp mainly) and
leather products are also being exported at an
increasing rate. Technology and innovation also
attract significant foreign capital.
How complex are the rules that govern foreign
investment in Bangladesh? Common challenges
faced by foreign investors.
Bangladesh has a restrictive foreign exchange
regime. The Bangladesh Bank allows repatriation of
dividends and other foreign exchange transactions
without its prior approval only upon the fulfilment of
the requirements specified in the Bangladesh Bank
Guidelines for Foreign Exchange Transactions (2009)
(for repatriation of proceeds of the sale of shares in
a private limited company, an application needs
to be submitted to the Bangladesh Bank for its prior
approval for the repatriation of such sale proceeds).
For the establishment of a Liaison Office (non-revenue

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generating marketing, etc., office) or a Branch Office

of a foreign entity, the foreign entity must obtain the
prior approval of the Board of Investment (BOI).
For an incorporation of a subsidiary, a proposed
company account must be established in a local
Authorised Dealer bank wherein the paid up capital
amount of the subsidiary needs to be first remitted by
the foreign investor, and the encashment certificate
from such bank (encashing into local currency) must
be filed along with the Memorandum and Articles
of Association with the Registrar of Joint Stock
Companies and Firms. If the subsidiary is an industrial
venture, then such venture will need to be registered
with the BOI.
In regards to the repatriation of sale proceeds from
the sale of shares in a private limited company, the
Bangladesh Bank in August of this year liberalized
its position as to the determination of fair market
value for purposes of approving the amount of sale
proceeds to be repatriated (in the case of publicly
traded shares held by a foreign investor, there is
no limitation on the amount of sale proceeds of
such shares that may be remitted). Currently, a
determination of fair market value may be made by
a Chartered Accountant or Merchant banker utilizing
a combination of three valuation approaches net
asset value, market value and discounted cash
flow approach- in applying for the amount of sale
proceeds that may be remitted (as opposed to the
prior position of allowing the remittance outwards of
sale proceeds of only up to the net asset value of
such shares).
Industrial enterprises in Bangladesh (local, foreign or
joint venture) may borrow, and remit principal and
interest payments, abroad with prior BOI approval.

As their lawyer, how do you advise them on these

challenges?
They should:
Learn their business, needs and availability of any
incentives or benefits (including the applicability
of a double tax treaty) and thereafter conduct a
structure analysis;
Conduct due diligence (legal and reputational)
on any local target or partner and/or real
property;
Prepare model contracts for employees,
consultants, service providers, etc. to ensure that
the local entity benefits from such contracts in
light of applicable law;
Make sure foreign national employees have valid
visa and work permit.
I see you are well-known for your M&A work; how
busy have you been with deals this year? Were a
large majority of them cross-border, or not?
For over the past year or two, I have been working on
3-4 major M&A transactions at any one time, with a
majority of them cross-border. LM

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