Foreign Exchange Investment Department (FEID) of Bangladesh Bank introduced two recent
circulars namely:
(a) Guidelines for operations of business in Bangladesh by Joint Venture/ Consortium/
Association (JVCA) having foreign nationals. 1
(b) Guidelines regarding issuance of ordinary shares in favor of non-residents in private/public
limited companies not listed with stock exchanges. 2
FEID Circular No.-02 enumerates the regulatory procedure of establishing a JVCA that has
foreign partners and its banking operations, loan procedure and outward remittance. The first and
foremost criteria of establishing a JVCA with non-resident partners, is to obtain permission from
Bangladesh Investment Development Authority (BIDA). All the undertakings of the JVCA must
be carried out in accordance with the BIDA permission letter. Within 30 days of attaining such
permission, the entity has to notify the Foreign Exchange Investment Department (FEID) of
Bangladesh Bank through the Authorized Dealers (ADs) under section 18B of the Foreign
Exchange Regulation Act (FERA), 1947.
Additionally, according to FEID Circular No.-01, for issuance of shares amounting up to BDT 1
(one) million against cash consideration in a resident company, ADs have to scrutinize the
relevant documents and within 14 days of such issuance, a declaration letter has to be submitted
to the FEID. The documents will also help ADs to identify the resident status of the shareholders
and country of funds. The declaration letter has to be prepared in 3 sets among which the 1st
Original shall be preserved by the AD in client’s file, 2nd and 3rd Original shall be provided to the
FEID. Bangladesh Bank shall return the 3rd Original after duly signing to the Bank and Bank
shall provide a copy to the client while keeping the Original in its records.
FEID Circular No.-02 also outlines the banking operation of a JVCA with foreign partners.
JCVA entities are required to open Bank Accounts with the name and title of the JCVA with any
AD Branch of a scheduled Bank of Bangladesh and those ADs will be considered as nominated
ADs. The relevant entities may maintain one or more local currency accounts. However, No
Obligation Certificate (NOC) has to be obtained from the nominated AD and any update
regarding the status such as opening, closure, dormant and change of the local currency accounts
has to be communicated to FEID and concerned office of Bangladesh Bank through nominated
ADs. The nominated ADs shall also monitor any inward or outward remittance and report such
information to the Bangladesh Bank. This requirement of monitoring is aimed to avoid any
money-laundering related issues. Moreover, any inward remittance of any partners of the JVCA
through existing Branch Office is not permitted.
With regard to any international or foreign funded projects, foreign currency accounts in the
name of JVCA may be opened by ADs subject to the terms of the approved contract with the
government authority and in such case, prior approval of Bangladesh Bank is not required. These
accounts must be closed as soon as the project ends. On the other hand, for opening a bank
account abroad, prior permission of FEID is required and the permission letter will regulate all
the transactions in such accounts.
FEID Circular No.-02 requires a proper financial reporting by the JVCA entities and for that, the
entities have to prepare a separate Audited Financial Statements as per Bangladesh Financial
Reporting Standards (BFRS) and the regulations of the Financial Reporting Council (FRC).
These financial statement must also have Document Verification Code (DVC). Moreover, JVCA
books of account must appropriately reflect all the local sourced income, whether credited in
Bangladesh or outside Bangladesh. According to FEID Circular No.-02, offsetting asset or
liabilities that are presented in the balance sheet is prohibited. There is also prohibition of
transferring or adjusting entries under the ‘Capital and Partners’ Contributions’ account head and
states that transactions shall be made in cash only. These guidelines aim to promote transparency
in the financial records of the JVCA.
For facilitating financing to the JVCA entities and also mitigating financial risks, FEID Circular
No.-02 provides loan related rules. The entities are required to follow the paragraph 4(b), chapter
16 of GFET regulations while taking out loan from any resident entities. Subject to the approval
of Bangladesh Bank and availability of unencumbered surplus funds, branch offices of the JVCA
partners can also provide loans to the entity. In accordance with the recommendation of the
employer, JVCA head office might as well provide interest free loans to the partners.
FEID Circular No.-02 also provides procedure to monitor outward remittance of a JVCA. For
repatriating profits to foreign partners, a prior approval from Bangladesh Bank is mandatory and
application has to be submitted to FEID together with required documents by the Nominated
AD. The relevant documents are as follows:
i) Joint Venture Agreement copy,
ii) Audited Financial Statements for the applicable period,
iii) Profit declaring resolution copy certified by auditor,
iv) Calculation of remittable amount certified by auditor,
v) Encashment certificates or documents reflecting foreign partner’s capital contribution,
vi) Auditor’s certificate of proper tax calculation on such profit and confirming that appropriate
provisions covering all the past and present tax liabilities in Bangladesh have been made,
vii) Final income tax assessment order,
viii) An undertaking that any amount remitted which was an ineligible amount, will be
repatriated to Bangladesh on Bangladesh Bank’s / AD’s demand.
ix) Last one year’s bank statement
x) Any other documents required by Bangladesh Bank while granting approval.
Without approval of Bangladesh, no profit or cash lending can be made to a non-resident
partner’s branch office in Bangladesh. BIDA Circular no.03.08.2680.224.165.1479.2017/59
should be followed for any payments of royalty, technical knowhow or assistance fees and any
franchise fees and Banks have to be notified through FE Circular Letter No. 07. Dated
11.04.2021. Any outward remittance not expressly mentioned in any circular, GFET, Import
Policy Order or BIDA guidelines, can be made only with expressed authorization of Bangladesh
Bank’s Foreign Exchange Investment Department. Bangladesh Bank’s approval is also needed to
repatriate any residual amount or loan from Head Office of a partner.
According to FEID Circular No.-01, for issuance of ordinary shares in favor of non-residents in
private/public limited companies not listed with stock exchanges ADs are required to follow Para
2(A) and 2(C) of Chapter 9 of Guidelines for Foreign Exchange Transactions. Before issuance of
shares, foreign exchange shall be brought in from abroad through banking channels.
Apart from the above requirement, the FEID Circular No.-02 also provides obligation on ADs to
verify the work permit of foreign nationals issued by BIDA or other authorities before making
any payment. The Audited Financial Statement shall include the salaries and benefits paid to the
foreign partners. It instructs the ADs to keep documents including Bill of Entry related to
machinery imported as capital without payment and such imports should follow Import Policy
Order. The JVCA entities with foreign partners, must comply with the Workers’ Profit
Participation of Labor Act 2006 and its rules. JVCA and Nominated AD both should follow
other instruction of Bangladesh Bank provided from time to time. In case of capital machinery
import, ADs shall give the share issuance application to Bangladesh Bank in accordance with the
FEID Circular No.-01.
These guidelines not only encourage foreign participation and foreign investment, but seeks to
ensure compliance with foreign exchange related best practices. FEID Circular No.-02
harmonizes laws and guidelines related to foreign exchange, banking operations, financial
statements into one coherent structure for smooth operation of any JVCA with foreign partners.
Through the requirement of reporting, both circulars promote transparency and ensures
adherence to the Bangladesh Bank’s regulatory framework.
Written by Managing Partner: Junayed Ahmed Chowdhury and Pupil: Taspia Tasnim
1 FEID Circular No.-02 dated 20.11.24
2 FEID Circular No.-01 dated 27.01.25
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