Legal Due Diligence Before Investing in a Bangladeshi Company: Why Each Check Matters
An investor who buys shares in a Bangladeshi company buys its past as well as its future. Every unpaid tax, defective land title, undisclosed loan and pending lawsuit becomes the investor's problem the day the money is paid.
Legal due diligence is the structured investigation that brings those problems to light before the deal is signed. Done properly, it lets the investor walk away, renegotiate the price, or demand protection in the transaction documents. Skipped or done carelessly, it can turn a promising investment into years of litigation.
This article explains the main areas of legal due diligence in Bangladesh, the purpose of each, and what can go wrong when it is neglected.
How legal due diligence is carried out
Every area below follows the same basic method: collect the documents, verify them independently, ask questions, and report the risks. The work usually runs in these stages:
Scoping. The investor and its lawyers agree which areas matter most, given the deal size, the sector, and whether shares or assets are being bought. A materiality threshold is set so that time is spent on real risks.
Confidentiality agreement. The parties sign a non-disclosure agreement before the target shares sensitive information.
Document request list and data room. The lawyers issue a detailed request list. The target uploads documents to a physical or virtual data room and answers in writing.
Independent verification. The lawyers do not rely only on what the seller provides. They obtain certified copies and run searches at public offices: the RJSC, Sub-Registry and AC (Land) offices, the DC office record room, the courts, and the relevant regulators. Photocopies are never accepted as proof of title or registration.
Management interviews and site visits. Directors, the company secretary and key managers are questioned, and factories, offices and land are inspected in person.
Follow-up questions. Gaps and inconsistencies are put back to the target in writing until they are answered or recorded as open risks.
Coordination with financial and tax advisers. Legal findings are matched against the accounts so that liabilities are neither missed nor double-counted.
Due diligence report. The findings are set out area by area, each rated by severity, with a short "red flag" summary for decision makers and a recommendation for each issue.
Transaction documents and closing. Findings are built into the price, conditions precedent, warranties and indemnities. Just before closing, key searches are repeated to confirm that nothing new has arisen.
1. Corporate records (RJSC)
What is reviewed: The Certificate of Incorporation, Memorandum and Articles of Association, latest Schedule X and Form XII filed with the Registrar of Joint Stock Companies and Firms (RJSC), the share register, allotment returns, and board and general meeting minutes.
Purpose: To confirm that the company legally exists, is in good standing, and is run by properly appointed directors. The Articles also reveal restrictions on share transfers, pre-emption rights of existing shareholders, and quorum or voting rules that will govern the investor's position.
Consequence of failure: An investor may pay for shares that were never validly issued, or deal with a person who has no authority to sign. A transfer made in breach of the Articles can be challenged by other shareholders. Persistent failure to file annual returns exposes the company and its officers to penalties under the Companies Act 1994 and can complicate future filings, fundraising and exit.
How it is carried out: Run a search of the company's file at the RJSC and obtain certified copies of the incorporation documents and recent returns. Compare the RJSC record with the company's own statutory registers and minute books. Check that each director's appointment and each board resolution followed the Articles, and read the Articles for transfer restrictions and special rights.
Key legal provisions:
Companies Act 1994, section 36: annual list of members and summary (Schedule X), filed after each annual general meeting.
Companies Act 1994, section 115: particulars of directors and any change, filed with the Registrar within 14 days (Form XII).
Companies Act 1994, section 92: directors' consent to act.
Companies Act 1994, section 159: registration of mortgages and charges within 21 days.
Companies Act 1994, Schedule I: model regulations that apply where the Articles are silent.
2. Shareholding and capital
What is reviewed: The chain of share issues and transfers, share transfer deeds and stamp duty, authorised versus paid-up capital, and any pledges, options, nominee arrangements or side agreements over the shares.
Purpose: To make sure the seller actually owns what is being sold, free of third-party claims, and that the investor's percentage will be what was agreed.
Consequence of failure: A hidden pledge to a bank, an undocumented nominee holding or an earlier unregistered transfer can give someone else a competing claim to the same shares. The investor may end up with a smaller stake than paid for, or with no valid title at all, and be drawn into a shareholder dispute before the High Court Division.
How it is carried out: Reconstruct the company's share history from incorporation to date, matching every allotment and transfer against filed returns, transfer deeds and board approvals. Ask the sellers to confirm in writing that there are no pledges, options or nominee arrangements, and check RJSC charge records and bank documents for pledged shares.
Key legal provisions:
Companies Act 1994, section 36: the annual list records every transfer since the last return, giving a public trail to test the seller's claims.
Companies Act 1994: provisions on the register of members, allotment returns and registration of share transfers.
Stamp Act 1899, Schedule I, Article 62: stamp duty on share transfers. Under section 35, an unstamped instrument is inadmissible in evidence.
The company's own Articles of Association: transfer restrictions and pre-emption rights.
3. Foreign investment and exchange control compliance
What is reviewed: For foreign investors, registration with the Bangladesh Investment Development Authority (BIDA), whether the sector is open, restricted or capped for foreign ownership, Bangladesh Bank reporting, and proof of inward remittance such as encashment certificates for earlier foreign capital.
Purpose: Foreign capital in Bangladesh is regulated under the Foreign Exchange Regulation Act 1947 and Bangladesh Bank's foreign exchange guidelines. Proper documentation of how money came in is what later allows dividends, sale proceeds and capital to go out.
Consequence of failure: If the original investment was not properly remitted and reported, the bank may refuse to remit dividends or exit proceeds abroad, leaving the investor's money trapped in Bangladesh. Investing in a restricted sector without the required permission can make the investment unlawful and attract regulatory action.
How it is carried out: Obtain the BIDA registration and any permissions, and check the sector against the current list of restricted or controlled sectors. Collect the bank's encashment certificates and Bangladesh Bank reporting for every past foreign investment. Confirm with the company's bank how the new investment must be remitted and reported.
Key legal provisions:
Foreign Exchange Regulation Act 1947: the framework for capital movements into and out of Bangladesh.
Bangladesh Bank, Guidelines for Foreign Exchange Transactions (GFET) 2018, Chapter 9, Para 2(A): after shares are issued to a non-resident, Bangladesh Bank must be informed through the authorised dealer bank within 14 days.
Foreign Private Investment (Promotion and Protection) Act 1980: protection against expropriation, equal treatment, and repatriation of capital and returns.
Bangladesh Investment Development Authority Act 2016: registration and facilitation of investment.
4. Licences and permits
What is reviewed: Trade licence, TIN, Business Identification Number (BIN) for VAT, import and export registration certificates (IRC/ERC), Fire Service licence, factory licence from the Department of Inspection for Factories and Establishments (DIFE), environmental clearance from the Department of Environment, and sector licences such as those issued by BTRC, BERC or IDRA.
Purpose: To confirm the company is legally allowed to carry on its business, that its licences are current, and that they will survive a change in ownership.
Consequence of failure: An expired or missing licence can lead to fines, sealing of premises, suspension of operations or cancellation of the business itself. Some sector licences require regulatory approval before ownership changes; ignoring this can put the licence, and therefore the whole business, at risk.
How it is carried out: Prepare a schedule of every licence the business needs, then match it against the licences actually held. Check each licence's holder name, address, scope and expiry date. Read the conditions for any requirement to notify or obtain consent from the regulator on a change in ownership, and confirm renewals with the issuing authority where in doubt.
Key legal provisions:
Local Government (City Corporation) Act 2009 and Local Government (Paurashava) Act 2009: trade licences.
Value Added Tax and Supplementary Duty Act 2012: VAT registration (BIN).
Imports and Exports (Control) Act 1950: IRC and ERC.
Fire Prevention and Extinction Act 2003: fire licence.
Bangladesh Labour Act 2006, section 326: approval of factory plans and factory licensing.
Bangladesh Environment Conservation Act 1995, section 12: Environmental Clearance Certificate.
Sector statutes, for example the Bangladesh Telecommunication Regulatory Act 2001, the Bangladesh Energy Regulatory Commission Act 2003 and the Insurance Act 2010.
5. Tax
What is reviewed: Income tax returns and assessments under the Income Tax Act 2023, VAT returns under the VAT and Supplementary Duty Act 2012, withholding tax deductions and deposits, and any pending audits, demands or appeals.
Purpose: To identify tax liabilities that are not shown in the accounts and that the company, and through it the investor, will have to pay.
Consequence of failure: Tax demands for past years survive a change of shareholders. An investor may discover large back taxes, interest and penalties after closing. Failure to deduct or deposit withholding tax can also create liabilities for the company and its officers, and unresolved VAT disputes can lead to bank account freezes.
How it is carried out: Collect income tax and VAT returns, assessment orders and acknowledgement receipts for at least the last five years. Check withholding tax deductions against challans deposited. List every open audit, demand, appeal or reference, and estimate the exposure for each. This work is usually done jointly with tax advisers.
Key legal provisions:
Income Tax Act 2023: returns, assessments, withholding (tax deduction at source) obligations, and penalties and interest for default.
Value Added Tax and Supplementary Duty Act 2012: VAT registration, monthly returns, audits, demands and recovery measures.
5A. VAT and supplementary duty compliance
VAT deserves separate attention because it is often the largest hidden liability in a Bangladeshi company, and VAT demands carry heavy interest and penalties.
What is reviewed: BIN registration and its category, monthly VAT returns (Mushak 9.1), tax invoices (Mushak 6.3), purchase and sales registers (Mushak 6.1 and 6.2), input tax credit claims, VAT deducted at source (VDS) and VDS certificates (Mushak 6.6), price declarations for manufactured goods (Mushak 4.3), supplementary duty on applicable goods and services, VAT audit reports, and any demand notices or appeals.
Purpose: To confirm that the company has charged, collected, deducted and deposited VAT correctly, and that its input tax credits will withstand a VAT audit.
Consequence of failure: A VAT demand can include the unpaid VAT plus interest and a penalty that may exceed the tax itself. VAT authorities can freeze bank accounts and lock the BIN, which stops the company issuing valid invoices and clearing imports. To appeal to the Appellate Tribunal, the company must first deposit a percentage of the demand (20% in reported cases), tying up cash for years. Disallowed input tax credits can turn past profits into losses.
How it is carried out: Reconcile the VAT returns with the audited accounts, sales records and bank statements for at least the last five years. Test a sample of tax invoices and purchase documents behind input tax credits. Check that VAT deducted from suppliers was deposited on time and that certificates were issued. Review every VAT audit, show-cause notice, demand and pending appeal, and estimate the exposure for each.
Key legal provisions:
Value Added Tax and Supplementary Duty Act 2012 and the VAT and SD Rules 2016: registration, returns, invoicing, input tax credit and VDS.
Section 73: demand for unpaid or short-paid VAT, with interest and penalty.
Section 122: appeal to the Customs, Excise and VAT Appellate Tribunal within the statutory period, subject to a mandatory pre-deposit of part of the demand.
Alternative Dispute Resolution (ADR) through the National Board of Revenue, available for VAT disputes pending before the Commissioner (Appeal), the Tribunal or the Supreme Court.
5B. Customs compliance
What is reviewed: Bills of entry and bills of export recorded in ASYCUDA World, tariff classification (HS codes) and declared values, duty exemptions and concessions claimed (for example concessionary duty on capital machinery) and the conditions attached to them, bonded warehouse licences and utilisation declarations for export-oriented units, duty drawback claims, bond audit reports, and any seizures, adjudications, demands or appeals.
Purpose: To identify unpaid duties, misuse of duty concessions, and breaches of bond conditions that could lead to demands or the loss of licences on which the business depends.
Consequence of failure: Customs can raise demands for short-levied duty with fines, and confiscate goods that were misdeclared. Post-clearance audit allows past imports to be reopened. Machinery imported duty-free and later used or sold outside the conditions of the concession can attract the full duty. For export manufacturers such as garment factories, suspension or cancellation of the bonded warehouse licence can halt production entirely. Serious misdeclaration or smuggling can lead to prosecution.
How it is carried out: Obtain the company's import and export data for at least the last three to five years and test a sample for classification and valuation. Reconcile bonded raw material imports against utilisation declarations, production and exports. Check the conditions of every concession claimed and confirm that the goods are still used as required. Review bond audit reports and list every pending adjudication, appeal and ADR proceeding with its exposure. Note which matters fall under the old law, since disputes arising before June 2024 may still be governed by the Customs Act 1969.
Key legal provisions:
Customs Act 2023 (Act No. 57 of 2023), in force from 6 June 2024, which repealed and re-enacted the Customs Act 1969. It covers import and export control, assessment and exemption of duties, electronic declarations, post-clearance audit, the Authorised Economic Operator scheme, fines, confiscation, and appeals.
Customs Act 1969: continues to matter for older disputes, including the statutory deposit for appeals under section 194 and appeals to the Tribunal under section 196A.
Customs tariff schedules and NBR notifications (SROs) granting exemptions and concessions, with their conditions.
Imports and Exports (Control) Act 1950 and the current Import Policy Order.
NBR rules governing bonded warehouse licensing and operation.
Alternative Dispute Resolution through the National Board of Revenue, available for customs disputes.
6. Land and property
What is reviewed: Title deeds and the chain of title, CS, SA, RS and BS khatians, mutation (namjari) records, land development tax receipts, registered leases, encumbrance searches at the Sub-Registry office, and any acquisition, requisition or khas land claims.
Purpose: Land is often a company's most valuable asset in Bangladesh, and also its most disputed one. This review confirms that the company owns or lawfully occupies the land on which its business depends.
Consequence of failure: Defective titles, forged deeds, overlapping claims and government acquisition are common sources of litigation. A factory or office built on disputed land can be the subject of injunctions or eviction proceedings. A lease that should have been registered under the Registration Act 1908 but was not may give the company little legal protection. Such disputes can run for decades.
How land due diligence is carried out: Each plot the company owns, leases or occupies is checked separately, using certified copies from government offices rather than the seller's photocopies.
Chain of title. Collect the current title deed and every earlier deed (via dalil), tracing ownership back to the oldest available record of rights. Obtain certified copies from the Sub-Registry or District Registry office and check that each transfer was properly executed, stamped and registered.
Record of rights. Obtain certified copies of the CS, SA, RS and, where applicable, BS or City Jarip khatians from the DC office record room. Match the owner's name, mouza, khatian and dag numbers, and land area across every record and deed.
Mutation. Verify the namjari khatian and Duplicate Carbon Receipt (DCR) at the AC (Land) office, or online where e-mutation records exist, to confirm the land has been mutated in the company's or seller's name.
Land development tax. Check that land development tax receipts (dakhila) are paid up to date. Arrears can indicate a weak or disputed claim.
Encumbrance search. Search the Sub-Registry office's volumes for at least the last 12 years, and longer where practical, for mortgages, sale agreements, powers of attorney or other registered transactions affecting the land.
Physical inspection and survey. A licensed surveyor (amin) measures the land against the mouza map to confirm boundaries and area. The lawyer confirms who is in actual possession and speaks to neighbours about any disputes.
Government interest checks. Confirm the land is not khas land, vested or abandoned property, or subject to acquisition or requisition proceedings at the DC office's land acquisition branch. Check land use zoning under the RAJUK, CDA or other development authority's plan, including water body and flood flow restrictions.
Inheritance and authority. Where land was inherited, confirm that every heir under the applicable succession law has joined or consented to the transfer. Where an attorney signed, verify that the power of attorney was registered and was valid at the time.
Litigation search. Search the civil courts and the Land Survey Tribunal for suits over the land, and check for any criminal complaints alleging land fraud.
Building approvals. For built-up land, verify the approved building plan, any occupancy certificate, and that the building matches the approval.
Leased premises. Check that any lease of more than one year is registered, that the lessor has title, and that the lease can survive a change in the company's ownership.
The findings are recorded plot by plot in a land schedule: ownership status, encumbrances, gaps in documents, and the steps needed to cure each defect before closing.
Key legal provisions:
Registration Act 1908, section 17: documents that must be registered, including sale deeds and leases of immovable property for more than one year. Under section 49, an unregistered document of this kind does not affect the property and is not admissible as evidence of the transaction.
Transfer of Property Act 1882: section 54 (sale), section 58 (mortgages), and sections 105 and 107 (leases and how they must be made).
State Acquisition and Tenancy Act 1950, section 143: maintenance of the record of rights, the legal basis for mutation; section 143B covers correction of the record on inheritance.
State Acquisition and Tenancy Act 1950, section 144 and 144A: revision of the record of rights. Each entry is presumed correct until proved otherwise.
State Acquisition and Tenancy Act 1950, section 145A: suits arising from the final publication of the latest revised record of rights lie in the Land Survey Tribunal, as amended in 2023.
Land Development Tax Act 2023: payment of land development tax.
Acquisition and Requisition of Immovable Property Act 2017: government acquisition and requisition of land.
Vested Property Return Act 2001: claims over property recorded as vested.
Power of Attorney Act 2012: registration and validity of powers of attorney used in land transactions.
Land Crimes Prevention and Remedy Act 2023: offences involving land fraud, forgery and unlawful occupation.
Building Construction Act 1952 and the applicable building construction rules: approval of building plans.
The law on conservation of playgrounds, open spaces, parks and natural water bodies (2000): restrictions on changing the character of protected land.
7. Finance and debt
What is reviewed: Loan and facility agreements, charges registered with the RJSC, the company's Credit Information Bureau (CIB) report from Bangladesh Bank, corporate guarantees given for others, and any history of default, rescheduling or write-off.
Purpose: To reveal the company's true borrowing position and any security its lenders hold over its assets.
Consequence of failure: An investor may find that key assets are mortgaged, or that the company has defaulted on loans and faces recovery proceedings in the Artha Rin Adalat. A company classified as a defaulter may be cut off from new bank credit. Change-of-control clauses in loan agreements may also allow lenders to call in the loans once the investment completes.
How it is carried out: Collect all loan, security and guarantee documents and compare them with the charges registered at the RJSC and the liabilities in the audited accounts. With the company's written consent, obtain its CIB report. Read every facility agreement for change-of-control, negative pledge and default clauses, and obtain current balance confirmations from the lenders.
Key legal provisions:
Companies Act 1994, section 159: charges must be registered with the Registrar within 21 days of creation.
Artha Rin Adalat Ain 2003: special courts for recovery of loans by banks and financial institutions.
Bank Company Act 1991: provisions on defaulting and wilful defaulting borrowers, including restrictions on fresh credit.
Transfer of Property Act 1882, section 58: mortgages over land and buildings.
8. Material contracts
What is reviewed: Major customer and supplier contracts, distribution and agency agreements, government and tender contracts, joint venture agreements, and transactions with directors, shareholders or their relatives.
Purpose: To check that the contracts generating the company's revenue are valid, enforceable and will continue after the investment.
Consequence of failure: A key contract may contain a change-of-control clause allowing the other party to terminate once new investors come in. Onerous exclusivity terms or penalty clauses may restrict growth. Related-party contracts on unfair terms can drain value from the company to insiders, at the investor's expense.
How it is carried out: Identify the contracts that matter most by value and strategic importance. Review each for term, termination rights, change-of-control and assignment clauses, exclusivity, liability caps and governing law. Check that contracts are signed, properly stamped where required, and in force. List all related-party arrangements separately and compare their terms with market rates.
Key legal provisions:
Contract Act 1872: formation and validity of contracts (section 10) and agreements void for unlawful object or consideration (section 23).
Stamp Act 1899, section 35: instruments not duly stamped are inadmissible in evidence until stamp duty and penalty are paid.
Companies Act 1994, section 130: directors' duty to disclose their interest in contracts with the company.
Arbitration Act 2001: enforcement of arbitration clauses and awards.
9. Litigation and litigation compliance
What is reviewed: Civil suits, Artha Rin Adalat cases, cheque dishonour cases under section 138 of the Negotiable Instruments Act 1881, writ petitions, labour court cases, and any criminal or Anti-Corruption Commission proceedings involving the company or its directors.
Purpose: To measure the company's exposure to court orders, damages and reputational harm, and to assess whether its management is under legal cloud.
Consequence of failure: An undisclosed suit may end in a money decree, an injunction over key assets, or an order affecting the business itself. Criminal or corruption proceedings against directors can freeze bank accounts, damage reputation, and disrupt management just when the investor needs stability.
How it is carried out: Obtain a written list of all pending and threatened cases from management, with copies of the pleadings and latest orders. Verify it independently through court records, cause lists and searches in the relevant districts and in the Supreme Court. Assess each case for its likely outcome and financial exposure, and require the sellers to disclose any case later found to be missing.
Key legal provisions:
Code of Civil Procedure 1908: civil suits, injunctions and execution of decrees.
Negotiable Instruments Act 1881, section 138: criminal liability for dishonour of cheques.
Artha Rin Adalat Ain 2003: loan recovery suits.
Anti-Corruption Commission Act 2004: investigation and prosecution of corruption offences.
Limitation Act 1908: time limits that determine whether a threatened claim can still be brought.
Litigation compliance
Knowing which cases exist is only half the review. The other half is whether the company is complying with the orders already made against it, and whether its cases are being properly defended.
What is reviewed: Injunctions, status quo and stay orders; decrees and their execution; compromise decrees and settlement payment schedules; undertakings given to any court; deposits ordered by courts or tribunals; orders of regulators and mobile courts; any contempt proceedings; whether the company has appeared in every case; and whether appeal deadlines have been met.
Purpose: To find out whether the company is exposed to sanctions for disobeying court orders, to decrees passed in its absence, or to rights lost through missed deadlines.
Consequence of failure: Disobeying an injunction can lead to attachment of the company's property and civil imprisonment of those responsible, and the High Court Division can punish contempt of its orders. A case left undefended can end in an ex parte decree, which may then be executed by attachment and sale of assets. A missed limitation period for an appeal can make an adverse decision final. A default under a compromise decree can revive the full original claim.
How it is carried out: Obtain certified copies of all operative orders and match each against the company's actual conduct. Send confirmation letters to the lawyers on record asking for the status, next date, compliance position and their assessment of each case. Check cause lists and court records to confirm appearances. Build a litigation tracker showing each case, its exposure, compliance status and next deadline, and check that adequate provision has been made in the accounts.
Key legal provisions:
Code of Civil Procedure 1908, Order XXXIX, Rule 2A: consequences of disobeying an injunction, including attachment of property and detention in civil prison.
Code of Civil Procedure 1908, Order IX, Rule 13: setting aside an ex parte decree; Order XXI: execution of decrees.
Constitution of Bangladesh, Article 108: the Supreme Court's power to punish for contempt.
Limitation Act 1908: time limits for appeals and applications.
10. Employment
What is reviewed: Compliance with the Bangladesh Labour Act 2006 and its rules, appointment letters and service rules, the Workers' Participation Fund and Welfare Fund, gratuity and provident fund obligations, trade union activity, and occupational safety records.
Purpose: To identify accumulated liabilities to workers and the risk of industrial unrest.
Consequence of failure: Unpaid contributions to workers' funds and unfunded gratuity can amount to significant sums that the investor inherits. Non-compliance can lead to labour court claims, DIFE inspections, penalties and, in serious cases, worker unrest that halts production.
How it is carried out: Review a sample of appointment letters, the service rules, wage records and attendance registers. Check deposits to the workers' funds, provident fund and gratuity provisions against legal requirements. Review DIFE inspection reports, union agreements and labour court cases, and interview HR management about disputes and practices.
Key legal provisions:
Bangladesh Labour Act 2006 (as amended, most recently in 2026) and the Bangladesh Labour Rules 2015.
Section 2(10): gratuity of at least 30 days' wages for each completed year of service, or 45 days' wages per year after more than 10 years.
Chapter XV, sections 232 and 234: companies meeting the statutory thresholds must contribute 5% of net profit to the Workers' Participation Fund, Welfare Fund and the Bangladesh Workers' Welfare Foundation Fund, in an 80:10:10 split.
Section 264: provident fund, which as amended must be set up in an establishment with at least 100 permanent workers when two-thirds of them demand it in writing.
Section 132: workers' claims for unpaid wages, gratuity and provident fund dues before the Labour Court.
Bangladesh Workers' Welfare Foundation Act 2006.
11. Intellectual property
What is reviewed: Trademark, patent and design registrations with the Department of Patents, Designs and Trademarks (DPDT), copyright in software and content, domain names, and licences to use third-party IP.
Purpose: To confirm the company owns the brand, technology and know-how that give it value, rather than its founders or outside parties.
Consequence of failure: A brand registered in a founder's personal name, or not registered at all, may be lost to a competitor or held back by the founder after a dispute. Software built by contractors without an assignment may not belong to the company. The investor may pay for goodwill the company does not legally own.
How it is carried out: Search the DPDT records for registrations and pending applications in the company's name, and for conflicting marks owned by others. Check that employees and contractors who created key software or content have assigned their rights to the company in writing. Review all IP licences for scope, term and change-of-control terms.
Key legal provisions:
Trademarks Act 2009 (amended 2015) and Trademark Rules 2015: registration and protection of trademarks and service marks.
Bangladesh Patent Act 2023: patents and utility models, replacing the Patents and Designs Act 1911 and the Patent Act 2022.
Bangladesh Industrial Design Act 2023: registration of industrial designs.
Copyright Act 2023: ownership of copyright, including in software; civil remedies under section 77.
Geographical Indication of Goods (Registration and Protection) Act 2013, where relevant.
12. Anti-money laundering and integrity
What is reviewed: The ultimate beneficial owners of the company, links to politically exposed persons, sanctions screening, the source of funds of existing shareholders, and any history of bribery or fraud allegations.
Purpose: To make sure the investor is not entering business with people or money that could expose it to criminal liability or reputational damage.
Consequence of failure: Investing alongside tainted funds can expose the investor to scrutiny under the Money Laundering Prevention Act 2012, including asset freezes and investigation. Foreign investors may also face consequences under their home countries' anti-bribery and sanctions laws. Reputational harm from such links can be lasting.
How it is carried out: Obtain declarations of beneficial ownership from every shareholder and trace corporate shareholders to the individuals behind them. Screen the company, its owners and directors against sanctions lists and adverse media. Ask about the source of funds and review the company's anti-bribery controls and any past allegations.
Key legal provisions:
Money Laundering Prevention Act 2012: money laundering offences, freezing and forfeiture of property.
Anti-Terrorism Act 2009: terrorist financing offences.
Anti-Corruption Commission Act 2004 and the Penal Code 1860: bribery and corruption offences.
Guidance issued by the Bangladesh Financial Intelligence Unit (BFIU) on customer due diligence and beneficial ownership.
13. Regulatory approvals for the deal itself
What is reviewed: Whether the transaction needs clearance from the Bangladesh Competition Commission under the Competition Act 2012, consent from a sector regulator, or, for listed companies, compliance with the Bangladesh Securities and Exchange Commission's rules on substantial acquisitions and takeovers.
Purpose: To make sure the investment itself is lawfully completed, not only that the target is in good order.
Consequence of failure: A deal completed without a required approval may be challenged, reversed or penalised. For listed companies, crossing a shareholding threshold without the required disclosures or open offer can bring regulatory sanctions and invalidate voting rights.
How it is carried out: Measure the deal against the thresholds and tests in the Competition Act, any sector regulator's rules and, for listed targets, the BSEC rules. Where approval is needed, build the filing timeline into the deal and make approval a condition of closing.
Key legal provisions:
Competition Act 2012, section 2(h): "combination" covers acquisition, taking control and amalgamation.
Competition Act 2012, section 21: combinations that adversely affect competition are prohibited, and the Bangladesh Competition Commission can approve or forbid them. Detailed combination regulations have been in draft form, so the current position should be checked for each deal.
Bangladesh Securities and Exchange Commission (Substantial Acquisition of Shares and Takeovers) Rules 2018: disclosure and open offer obligations for listed companies.
Sector statutes requiring regulatory consent to ownership changes, such as banking, insurance and telecommunications laws.
Turning findings into protection
Due diligence is not an end in itself. Its findings shape the deal: they can lower the price, become conditions that must be met before closing, or be covered by warranties and indemnities from the sellers. Money can be held in escrow against specific risks, and some problems, such as an unregularised land title, can be required to be fixed before any money changes hands.
The cost of a thorough review is small compared with the cost of discovering a problem after the investment is made, when the investor's leverage is gone.
How The Justice Corner can help
The Justice Corner advises local and foreign investors on acquisitions and investments in Bangladeshi companies. We conduct full legal due diligence, prepare clear risk reports, and draft and negotiate the share purchase, subscription and shareholders' agreements that protect your investment.
Before you invest, contact The Justice Corner, Dhaka, to discuss your transaction.
This article is for general information and is not legal advice. Laws change; the provisions cited should be checked against the current consolidated text before relying on them.