Blog Details

Cross-Border Business Partnerships in Bangladesh: Legal Framework and Agreement Structuring for Foreign Investors

Introduction

Foreign investors can enter Bangladesh with 100% ownership in most sectors and without prior approval, but the value of any partnership depends on how well it is registered, funded and documented. Bangladesh is a common-law jurisdiction: its contract, company and arbitration statutes follow English models, so a well-drafted agreement is enforced much as an investor would expect at home.

The practical risks lie elsewhere. Foreign exchange is tightly controlled by Bangladesh Bank, some sectors require licences, and local partners may hold more practical influence than their shareholding suggests. This guide sets out, first, the legal provisions that govern cross-border partnerships and, second, how to structure commercial agreements so that a foreign investor's capital, control and exit are protected.

Part I – Legal Provisions Governing Cross-Border Business Partnerships

No single statute governs cross-border partnerships. A foreign investor's position rests on five layers: investment-protection law, the vehicle law, the investment authority, foreign-exchange control, and dispute-resolution law.

1. Investment protection: the Foreign Private Investment (Promotion and Protection) Act, 1980

The 1980 Act remains the foundation of investor protection. It promises fair and equitable treatment, protection and security of foreign investment, compensation if an investment is expropriated or nationalised, and the right to repatriate capital and returns (Section 8). Foreign investors are treated no less favourably than local investors, and no prior approval is generally required for foreign direct investment.

These guarantees operate alongside, not above, foreign-exchange rules. In practice the right to repatriate is exercised through Bangladesh Bank procedures, so the contract must be drafted to fit those procedures.

2. The new investment authority: Invest Bangladesh Act, 2026

The Invest Bangladesh Act, 2026 came into force on 20 August 2026. It merged BIDA, BEZA and the PPP Authority into a single statutory body, Invest Bangladesh, under the Prime Minister's Office. Four statutes were repealed and consolidated:

Bangladesh Investment Development Authority Act, 2016

Bangladesh Economic Zones Act, 2010

Public-Private Partnership Act, 2015

One Stop Service Act, 2018

Invest Bangladesh now handles project registration, work permits, branch and liaison office permissions, economic-zone allotments and PPP structuring. It continues to run the BanglaBiz single digital portal. Agreements, board resolutions and filings that still refer to "BIDA" or "BEZA" should be updated to the new authority and the new Act.

3. Choice of vehicle

For almost every foreign investor, an incorporated joint venture company is the safest vehicle. Liability is limited and shareholder rights can be written into the Articles of Association.

4. Contract law limits

Every partnership agreement is tested against the Contract Act, 1872. Three provisions matter most:

Section 23 – an agreement with an unlawful object or consideration, or one opposed to public policy, is void.

Section 27 – an agreement in restraint of trade is void, subject to narrow exceptions. Post-exit non-compete clauses must be drafted carefully.

Section 28 – an agreement restricting a party's right to go to court is void, but arbitration agreements are expressly saved.

The Specific Relief Act, 1877 governs injunctions and specific performance. It is the main route to stop a local partner from breaching exclusivity or transfer restrictions.

5. Foreign-exchange control

Bangladesh Bank administers the Foreign Exchange Regulation Act, 1947 through the Guidelines for Foreign Exchange Transactions (GFET) and periodic circulars. Every cross-border flow must pass through an Authorised Dealer (AD) bank.

The September 2026 remittance circular is valid for one year, so remittance clauses should refer to "applicable Bangladesh Bank regulations as amended" rather than to fixed figures.

6. Tax, labour and sector rules

Income Tax Act, 2023 – governs corporate tax, withholding on dividends, royalties and service fees, and transfer pricing on related-party payments. Double taxation treaties can reduce withholding rates.

Labour Act, 2006 – applies to the joint venture's workforce, including the Workers' Profit Participation Fund where applicable. Foreign staff need work permits.

Sector licences – banking, insurance, telecommunications, power and similar sectors need separate regulator approval and may carry ownership limits. A small reserved list (such as arms and security printing) is closed to private investment.

Special zones – export processing zones (BEPZA) and hi-tech parks retain their own incentive regimes.

7. Dispute resolution

Arbitration Act, 2001 – based on the UNCITRAL Model Law. Sections 45–47 provide for recognition and enforcement of foreign arbitral awards.

New York Convention – Bangladesh is a party, so awards made in Singapore, London or other Convention states are enforceable here. Foreign court judgments are much harder to enforce.

Commercial courts – specialised commercial courts began operating under the Commercial Court Ordinance, 2026 (in force 1 January 2026), later enacted as an Act, to speed up commercial disputes.

Treaty protection – Bangladesh has bilateral investment treaties with many capital-exporting states and is a member of ICSID, giving qualifying investors a further route against state action.

Part II – Structuring Effective Commercial Agreements to Secure Foreign Investors' Interests

A foreign investor is protected by the whole document set, not by one clever clause. The core set is a Joint Venture or Shareholders' Agreement, Articles of Association that mirror it, and the side agreements (technology licence, supply, management services) through which value actually flows.

1. Make the Articles carry the deal

Bangladeshi courts look first to the company's Memorandum and Articles of Association. A veto, pre-emption right or board seat that sits only in the Shareholders' Agreement may bind the shareholders personally but may not bind the company or a new shareholder.

Write every governance and transfer right into the Articles, and adopt them before completion.

Add a clause that the Shareholders' Agreement prevails between the parties, and a covenant to amend the Articles if a conflict appears.

File the amended Articles with RJSC so third parties have notice.

2. Key clauses and how each protects the investor

3. Dispute resolution that can actually be enforced

Arbitration over courts. A foreign court judgment is difficult to enforce in Bangladesh, but a New York Convention award is enforceable under section 45 of the Arbitration Act, 2001.

Seat. Singapore (SIAC) or London (LCIA/ICC) gives a neutral forum and a supportive supervisory court. Dhaka (BIAC) is cheaper and suits smaller disputes.

Clause content. State the seat, rules, number of arbitrators, language (English) and that the award is final and binding.

Interim relief. Expressly allow either party to seek injunctions from the High Court Division or commercial courts in Bangladesh, where the assets are.

Governing law. Bangladeshi law is often chosen for the Shareholders' Agreement because the company is Bangladeshi. Side agreements such as licences can use English or Singapore law.

Treaty structuring. Holding the investment through a company in a country with a Bangladesh investment treaty can add protection against state action.

4. Protecting the exit

Exit is where most foreign investors lose value. Plan it on day one:

Keep a full record of encashment certificates, share allotment returns and Bangladesh Bank reporting from the first remittance.

Agree the valuation method in advance and use a method Bangladesh Bank will accept.

Require the local partner and the company to cooperate with all repatriation filings, with an indemnity for delay caused by their default.

Allow sale to a third party or a group company if the local partner will not buy.

Obtain tax clearance and settle all liabilities before final repatriation of residual assets.

5. Securing the local partner's obligations

Personal or corporate guarantees from the local partner's parent or principals.

Pledge of the local partner's shares in the JV company in favour of the investor, recorded with the company.

Escrow or staged payment for contributions in kind, such as land, with title verified before transfer.

Clear rules on land and premises: lease or transfer to the JV company, mutation and registration completed before funding.

Part III – Risks in Practice and How the Investor's Interest Is Protected

Most losses suffered by foreign investors in Bangladesh come from two sources: the operating environment, and a local partner who gains practical control on the ground. Both risks can be reduced by documents, structure and early legal action.

1. Difficulties a foreign investor may face

2. Problems commonly faced with a local partner

3. How the investor's interest can be well protected

Protection works best in layers, set up before money is invested:

Due diligence first. Verify the partner's RJSC records, litigation, tax status, CIB report, land title and reputation before signing.

The right vehicle. Use a private limited company in which the investor holds shares directly, rather than an informal or nominee arrangement.

Matching documents. Shareholders' Agreement and Articles of Association carrying the same vetoes, board rights, transfer restrictions and exit options (see Part II).

Financial controls. Investor-nominated finance head or CFO, dual bank signatories, approved annual budget, and independent auditor.

Ownership of key assets. Land, licences, IP and contracts held by the company or the investor, never by the partner personally.

Security for performance. Share pledge, parent guarantee, escrowed transfer documents and a default call option at a discount.

Enforceable dispute route. Arbitration seated in a New York Convention state, with express right to interim relief from Bangladeshi courts.

Regulatory record. Complete Invest Bangladesh, RJSC and Bangladesh Bank filings so capital and profits can always be repatriated.

Treaty cover. Where the investment is large, hold it through a company in a state that has an investment treaty with Bangladesh.

Early legal action. At the first sign of diversion, false filings or criminal pressure, act quickly: injunctions, criminal complaints and court applications are far more effective at an early stage.

Part IV – How Bangladeshi Courts Protect Foreign Investors

The Supreme Court of Bangladesh has repeatedly enforced the promises made to foreign investors. Over two decades, the High Court Division has quashed arbitrary cancellations and ordered regulators to decide applications they had sat on. It has struck down unlawful charges and tax demands, protected concessions while arbitration went ahead, and restored foreign shareholders' rights against a local partner's fraud.

1. The law the courts enforce

Foreign Private Investment (Promotion and Protection) Act, 1980. Section 4 promises fair and equitable treatment and full protection and security. Section 5 bars unilateral adverse changes to a sanction or permission. Section 7 restricts expropriation to a public purpose against prompt compensation, and section 8 guarantees repatriation. The courts treat sections 4 and 5 as enforceable law, not policy statements.

Constitution. Article 31 (protection of law) extends to foreigners and to companies registered in Bangladesh. Articles 27 (equality) and 40 (freedom of trade) also apply. Article 102 lets the High Court Division enforce them all.

Arbitration Act, 2001. Section 7A allows interim protection before, during and after arbitration, including foreign-seated arbitration. Section 45 enforces foreign awards.

Companies Act, 1994. Section 43 (rectification of the share register) and section 233 (oppression of minority shareholders) protect foreign shareholders inside the company.

Can a foreign company go to court? Yes. In Northpole (BD) Ltd. v. BEPZA, the High Court Division held that a foreign-owned company cannot enforce Part III fundamental rights under Article 102(1). It can, however, apply under Article 102(2) as a "person aggrieved" by any authority that fails to act in accordance with law.

2. Leading decisions: protection against the State and regulators

3. Leading decisions: contracts, concessions and arbitration

4. Leading decision: protection against a local partner

Chow Wen Chang v. S.F. Winsome Fashion Ltd., 65 DLR 584 (HCD, 2013). Two foreign shareholder-directors held two-thirds of a garments company. Without a meeting, notice or quorum, the Bangladeshi managing director allotted 10,500 new shares to himself and his relatives. He then sold the company's land to his own company, which resold it.

The court rectified the share register under section 43 of the Companies Act, 1994 and declared both sale deeds void. It also directed the Sub-Registrar to cancel them and awarded costs. The allotment breached the Articles and the pre-emption rule in section 155. The local partner argued that the foreigners lacked Bangladesh Bank approval under FERA. The court rejected this: foreign investors using their own funds need no prior permission. Fraud vitiated everything, and a later buyer took no title.

This is the clearest authority that the courts will undo a local partner's dilution and asset-stripping. It also shows why the Articles' quorum and pre-emption rules (Part II) matter.

5. Leading decisions: foreign bidders in public tenders

6. The limits investors should know

No immunity for a tainted deal. In Ekushey Television and SSA Bangladesh, licences and concessions obtained through non-transparent processes were struck down even though foreign money was involved. Foreign investors "take the risk" of a deal that was unlawfully made.

Pure contract claims go to arbitration or civil suit. Karnafully shows a writ will not enforce an ordinary contract with the Government.

Policy changes are not enough. Courts review legality and fairness, not the wisdom of fiscal policy (Abul Khair).

On-demand guarantees are hard to stop. Unless there is clear fraud, the guarantee will be paid (Southern Solar).

7. What this means when structuring the deal

Keep every approval, NOC and letter, and record what you invested in reliance on it. Promissory estoppel and section 5 of the 1980 Act depend on that proof.

Ask for government undertakings to be executed in the President's name under Article 145, or within a statutory framework, so that public-law remedies remain open.

Include an arbitration clause with clear notice and cure periods. Section 7A relief is strongest where the authority ignores them.

Negotiate performance security as conditional, not purely on-demand, where possible.

Win the contract through a clean, documented process. A transparent award is also the best defence against a later challenge.

Write quorum, pre-emption and reserved-matter rules into the Articles, so the court can apply them against a local partner, as in Chow Wen Chang.

Case summaries are drawn from The Justice Corner's Case Digest on writ jurisdiction in contractual disputes with public bodies (October 2026). Check citations and later treatment before relying on them in court.

Practical Checklist for Foreign Investors

☐ Confirm the sector is open and identify any licence or ownership cap

☐ Carry out due diligence on the local partner: RJSC records, litigation, tax, land title, CIB report

☐ Choose the vehicle (usually a private limited JV company)

☐ Register the project with Invest Bangladesh through BanglaBiz

☐ Sign the JV or Shareholders' Agreement and adopt matching Articles of Association

☐ Remit capital through an AD bank and collect encashment certificates

☐ Put licence, supply and service agreements in place within Bangladesh Bank limits

☐ Use an arbitration clause seated in a New York Convention state

☐ Agree dividend policy, valuation method and exit routes in writing

☐ Review documents after each new Bangladesh Bank circular or change in investment law

The Justice Corner: Expertise in Cross-Border Transactions and Investor Protection

The Justice Corner is a Dhaka chamber that acts for foreign investors and their Bangladeshi partners from the first enquiry to final exit. Led by a Barrister of the Middle Temple who practises before the Supreme Court of Bangladesh, the chamber combines English-law drafting with day-to-day experience of Bangladeshi regulators and courts. Foreign clients receive advice in clear English, on agreements that are built to be enforced here.

Our areas of expertise

Why foreign investors instruct us

Dual qualification. English Bar training and Bangladeshi Supreme Court practice in one team, so the agreement and its enforcement are planned together.

Enforcement-first drafting. Every clause is written with the Bangladeshi court, RJSC and Bangladesh Bank in mind, not only the negotiating table.

Advocacy at the apex court. When a dispute arises, the same chamber that drafted the agreement can take it to the High Court Division and Appellate Division.

Current on reform. We track changes such as the Invest Bangladesh Act, 2026, new commercial courts and each Bangladesh Bank circular, and update clients' documents accordingly.

Direct partner attention. Matters are supervised by the Head of Chamber, with clear fees and regular reporting.

To discuss an investment, a joint venture or a dispute with a local partner, contact The Justice Corner:

Office: 37/2 Purana Paltan, Pritom-Zaman Tower, Level 11, Suite 1207, Dhaka-1000

Phone: +88 01760907777

Email: info@justicecornerbd.com

Web: justicecornerbd.com

Mohammad Imam Hossain (Tareq) Advocate, Supreme Court of Bangladesh · Barrister-at-Law (Middle Temple) Head of Chamber, The Justice Corner, Dhaka

This article is general information on the law as of October 2026, not legal advice for a specific transaction.