What is a Joint Venture Company in Bangladesh?

A joint venture (JV) company, like other companies, a legal entity and is formed and regulated by Companies Act of 1994 and the VAT and Supplementary Duty Act, 2012. You may wonder, what makes a joint venture company different than other companies? That is such company is formed between two or more entities, including one local and one foreign individuals or organizations. Importantly, shareholders are only liable for the company’s debts up to the amount of share capital they have contributed.

If you want to form one, it will take 3 to 4 weeks to register a company. But first you have to submit all the documents after submitting all required documents to the Registrar of Joint Stock Companies (RJSC). Here is a step by step procedure you may follow :

Step-by-Step Procedure to Register a Joint Venture Company in Bangladesh

Step 1: Joint Venture Agreement Drafting

You already know, Joint Venture Agreement (JVA)  is between the parties involved, typically a local entity and a foreign investor. This agreement must outline the key terms of the joint venture, according to Section 4 of Companies Act 1994. They are:

• The business scope of the company.
• The company name
• The shareholding ratio between the partners.
• The governing laws and jurisdictions for dispute resolution.
• The roles and responsibilities of the board of directors and shareholders.
• The liabilities and profit distribution mechanisms.

Once the terms of the agreement are finalized, it is executed on a non-judicial stamp paper of BDT 300 (as per the Stamp Act, 1899) and signed by both parties or their authorized representatives.

For any queries or legal assistance, please reach us at E-mail: info@counselslaw.com Call: +8801700920980.

Step 2: Obtain Name Clearance from the RJSC

The next step is to reserve the name of the proposed company. You can check the availability of the name via the RJSC Name Clearance Portal. Once a name is selected, the applicant must file a name clearance application, and the payment of the required fee is done through a designated bank.

This clearance confirms that the name is available and does not violate any existing trademarks or company names.

Step 3: Draft the Memorandum of Association (MOA) and Articles of Association (AOA)

The Memorandum of Association (MOA) and Articles of Association (AOA) must be drafted in accordance with Bangladesh’s corporate laws. The MOA defines the company’s core purpose, its objectives, and scope of operations, while the AOA lays down the rules for managing the company, the conduct of its meetings, and the roles of directors and shareholders.

It is advisable to consult a Bangladeshi lawyer or law firm to ensure that both documents comply with local laws and reflect the intentions of the parties involved. This will help mitigate any legal risks in the future.

Step 4: Draft and Execute Form XII and Form IX

After the MOA and AOA are finalized, Prepare this:

• Form XII: Declaration of compliance with all legal formalities.
• Form IX: Particulars of the first directors.

Both forms must be submitted with the necessary information as per the structure agreed upon by the company and the RJSC.

Step 5: Open a Temporary Bank Account for Foreign Share Capital (if applicable)

For this step, we follow Foreign Exchange Regulation Act, 1947 (for rules governing foreign capital inflow). For foreign shareholders, the company must open a temporary bank account with an authorized bank in Bangladesh. This is required to deposit the foreign share capital. The following documents are typically needed:

• A signed copy of the MOA and AOA.
• A name clearance certificate.
• A completed bank form and other bank-specific documents.

Once the foreign share capital is deposited, the bank will issue an encashment certificate, confirming the transfer of funds. This certificate must be submitted to the RJSC along with all other incorporation documents.

Step 6: Submit Documents to RJSC for Incorporation

Now all your documentation process is done. You have come to the last step, submitting them to the Registrar of Joint Stock Companies (RJSC). The RJSC will verify the submitted documents, and upon approval, it will issue the Certificate of Incorporation for the joint venture company.

It generally takes about 3 to 4 weeks once all documents are properly submitted and verified.

That’s all! Now you have successfully formed a Joint Venture Company to run in Bangladesh.

Here are some pros and cons of such company, that may help you to take the right decision:

Pros of a Joint Venture in Bangladesh:

1. Local Market Expertise: Access to local knowledge and networks.
2. Shared Risks and Costs: Reduces financial burden and risk.
3. Faster Market Entry: Leverages existing distribution channels.
4. Cultural Understanding: Helps navigate language and cultural barriers.
5. Government Incentives: Potential tax exemptions and support.

Cons of a Joint Venture in Bangladesh:

1. Exit Complexity: Winding up can be time-consuming and difficult.

If you want to get professional legal help to form your company that is safe from potential conflict, you can reach us for consultancy at: info@counelslaw.com