When a foreign investor decides to set up a business in Bangladesh, there are three options:

• Liaison Office (which does not have legal personality itself):
• Branch Office (which does not have legal personality itself); and
• Locally registered company (being a separate entity with legal personality).

LIAISON OFFICE

Foreign companies may open their Liaison Offices in Bangladesh (subject to obtaining specific approval from Bangladesh Investment Development Authority) for undertaking liaison activities on their behalf. These Liaison Offices act as a communication channel between the foreign companies and the Bangladeshi customers. Such offices are normally established by foreign companies to promote their business interests in the country by spreading awareness of their services/products and exploring their opportunities for setting up a permanent presence. A Liaison Office also requires registration with the Registrar of Joint Stock Companies and Firms.

A Liaison Office is not allowed to undertake any business activities therefore, cannot earn any income in Bangladesh, under the terms of approval granted by the Bangladesh Investment Development Authority (BIDA). All setup and operational costs including salaries of the expatriates and local employees of the Liaison Office will have to be borne by the parent company abroad through inward remittance of foreign exchange. No outward remittances of any kind from Bangladesh will be allowed except the amount brought in from abroad (the unspent part).

A Liaison Office in Bangladesh is permitted to undertake the following activities:

• Maintain liaison/ coordination between principal and local agents, distributors/exporters’ institutions through correspondences, personal contracts and other electronic media.
• Collect, compile analyze and disseminate business information related to its field of activities as mentioned in the approval letter.
• Just to avoid confusion, both Representative Office and Liaison Office refer to the same thing in Bangladesh.

BRANCH OFFICE

• A Branch Office is setup as an extension of a foreign company in Bangladesh. Foreign companies may open branch offices to conduct business in Bangladesh. Unlike a Liaison Office, a Branch Office can perform a broader scope of activities subject to prior approval of BIDA.
• A Branch Office cannot undertake any activity in Bangladesh that is not explicitly permitted by BIDA. A Branch Office is also required to register itself with the Registrar of Joint Stock Companies and Firm and comply with certain procedural formalities prescribed under the Companies Act.
• A Branch Office provides the advantages of ease in operation and an uncomplicated closure. However, since the operations are strictly regulated by exchange control guidelines, a Branch May not provide a foreign company with the most optimum structure for its expansion/diversification plans.

LOCALLY REGISTERED COMPANY

Foreign investors can set up their subsidiary companies in the form of private/public limited companies in Bangladesh. In most sectors, 100% foreign ownership is allowed. Foreign investors may also set up JV with local or foreign partners.

In most sectors, prior approval of the government or any government agency is not required. Depending on the nature of activities, prior approval of the government may be required.

In comparison with the Branch Office or Liaison Office, a subsidiary company provides maximum flexibility for conducting business in Bangladesh.

The subsidiary company incorporated under the laws of Bangladesh will be a domestic company for tax purposes.